If you want to get a car loan without getting screwed up, then read this article because I’m going to teach you exactly how to get a car loan.
The right way financing a car is a big deal because if you don’t do it the right way, you’re gonna lose a ton of money, and you’re probably going to end up going upside down in your car.
I bought my first car when I was 20 years old, and I was so stupid because I got a $20,000 loan for seven years at seventeen percent interest so please don’t do what I did because I didn’t do any research and I took terrible advice for my friends on how to grow my credit, and we all know that lousy information will always lead to foolish decisions.
I’ll start by saying that financing a car is broken into three different parts, but you’ve got to understand how these different parts work not to get screwed as the consumer we’ll be looking at the amount borrowed the interest rate and the length of the loan those are the three different parts that you need to understand.
These three different numbers will determine what you can or can’t afford as a monthly car payment.
So pay attention and remember that a monthly payment doesn’t determine what you can afford until you apply.
Now starting with the amount borrowed, this will be your entire car purchase plus any taxes and fees, and any money that’s left from a previous car loan is everything you need to borrow from the bank to purchase your car.
Make sure to research the car that you’re buying so that you can get the best deal possible, and please don’t pay full price for extended warranties or carpet cleaning anything like that because those prices are all negotiable. Just remember to get the best price possible on your car purchase.
As far as the interest rate goes, this is just the amount of money you have to pay back the bank even to have your car loan.
To get the best interest rates, you’ve got to have excellent credit, or you’ve got to have a cosigner that has excellent credit.
To make it happen and if you are using a cosigner make damn sure that you can make your monthly payments every single month because if you’re late just once you’re going to hurt their credit score and trust me, they’re going to be pretty pissed when they go in to get a loan, and they realize that you screwed their credit score.
The bottom line here is that if you do have bad credit, stick with the cheap car so that you can make the payments and build your confidence along the way, or you could pay cash and save up like we used to back in the day.
You’ll also want to have a down payment of about 10 to 20 percent to get the best rates, and new cars will typically need about 20 percent down because of their fast depreciation I know that 20% down is a lot, but you’ve got to understand that to get the best rates you got to make a few sacrifices.
If you have an existing car that you can sell, take those profits, and use those towards your down payment, and you’ll probably have enough now if you don’t have very much down you can at least see what the banks will give you because it’s worth a try.
The best car loan interest rates are typically about 3 to 5 percent which will cost you about 30 to 50 bucks a year per thousand dollars that you borrow so if you’re financing $20,000 then you’re going to be looking at about 600 to $1,000 a year in interest, but that’s on optimal credit and with a good downpayment.
If you are given a rate that’s higher than 5%, then I would highly suggest working on your credit score or paying cash for the car so that you don’t go completely upside down on it.
Being upside down in your car means that you owe more than the vehicle is worth and that is not a good thing cars naturally depreciate on their own which sucks, but it is normal but keep in mind that you don’t want to be paying a ton in interest because you will go upside down in your car now when you decide to finance a car.
I would stick with just banks and credit unions because they always have the best rates shop around online and I’m sure that you’ll find a bank quick and easy and please don’t go with your local bank just because you know who they are because that doesn’t always mean that they’re going to have the best rates always go with whoever has the best terms because that’s going to save you the most money on your car loan.
Now as an example I live in Indore, and I actually financed a car once through a company Gujrat because they had the best rates and it was easy to pay online dealers can also get you excellent rates on car loans but make sure that they don’t get a cut of the interest rates and if they’re not taking a cut and go ahead and use them.
Because it’s a lot easier and you probably only have to get your credit for at once, and sometimes car manufacturers will even offer their rates, which are typically really good from about 2% to 0% on new car purchases.
So if you’re looking into a new car and offering 0% financing, and there’s nothing funny about it, then that is a seriously good deal.
Finally, let’s cover the length of the loan, which is the amount of time that you’re going to be making monthly payments until the loan is paid off. Remember this, the longer the length of the loan, the smaller your car payments will be.
But remember that the longer the loan is, the more that you’re going to pay interest, and this is what you have to understand because banks and dealers will increase the length of your loan to get your payment.
Where you want them so that you think you’re getting a good deal, the monthly payment is only essential if you’re following the three parts that I’ve been talking about.
Now the car loan length should only be about 24 to 60 months if you go with anything more extended than the 60 months you’re going to see the interest rates increase, and you’re guaranteed to waste way too much money on your car.
Typically the interest rates will go up to about one to two points for every year you extend past sixty months, and that’s also for the customers with the best credit score. So please don’t do anything higher than five years.
So let’s say that you buy a car for fifteen thousand dollars at a four percent interest rate for 60 months your monthly payment is going to be about three hundred bucks a month for the next five years and you’re going to pay almost sixteen hundred dollars in interest over the life of the loan.
Now let’s pretend that we buy the same 15 thousand dollar car, but this time you’re going to pay eight percent interest over eighty-four months, your payments now going to be two hundred and thirty-three dollars a month, which is better than the two seventy-six.
But this is all a lie because you’re going to pay a ton more interest you’ll now be paying about forty-six hundred dollars in interest for the car loan, and you’ll be spending on it for the next seven years so now can you see why having a longer low is a bad idea.
It’s all a big fat lie because your monthly payment might look good on paper, but it’s a total ripoff, and after just a couple years I guarantee you you’re going to be upside down in your car and you’ll still have five years to go on the loan did.
You know that the average car loan is 68 months long at 4.2 percent interest for $30,000 borrowed those are terrifying numbers because it proves that most of us are buying way too much car.
Now I want to make a quick note here about car insurance before you go out and buy a car please call your car insurance to find out how much the new car is going to cost you.
Because if you’re looking into some fancy 7 Series BMW and it costs you a hundred and fifty bucks more a month in insurance and it’s probably worth looking into something else.
So call your insurance before you buy a car so that you know how much more it’s going to cost and now after all of this information you know how to finance a vehicle make sure to get the best price for the car the best interest rate and make sure that you’re only keeping a loan for 24 to 60 months and if you follow these three parts correctly I guarantee you you’re going to get the best financing possible for your car loan.