Getting a car loan can seem like a hassle, but you can save thousands of dollars if you shop around for the right loan. Since your car is likely to be one of the most expensive purchases you will make, it’s important to know how to get the cheapest auto loan possible.
Shop Around for an Affordable Loan
Different lenders charge different rates, which is why it’s important to compare all the loan options you have. Don’t forget to reach out to credit unions and online lenders since they usually have the best rates.
Work Out the Numbers
While a low rate of interest is attractive, it is not the only number you should take into consideration. Ensure that you also take things like the pre-payment charges, closing costs, etc., into account since these charges could increase the cost of the loan.
Work on Improving Your Credit Score
Whether you like it or not, lenders will take your credit score into consideration when deciding the interest rate for the loan. An individual who has a high credit score is considered creditworthy, and will, thus, be offered the loan at a low rate of interest. In comparison, if you have a poor credit score, expect to pay more. Given this, it’s best to check your credit score before you apply for your loan.
Opt for a Short Loan Term
The shorter the term of the loan, the higher your monthly loan payment. But, that’s not necessarily a bad thing. Keep in mind that if you opt for a long-term loan, your lifetime interest charges will be a lot higher even if the monthly payment seems low. So, get a loan with a short term, and you’ll be paying far less in interest.
Make a Large Down Payment
The more you pay as a down payment, the lesser you’ll have to borrow. This means the monthly amount that you’ll have to pay will be low as well. It’s a good idea to make a down payment of at least 20%.
