Committing to a car loan may not seem like a huge task, but it’s actually a major responsibility, which is why you should consider what it entails before taking this big step. To help you more clearly determine what type of auto loan is right for you, let’s look at some pointers to consider before committing to a car loan.
#1: Find Out the Base Interest Rate and APR
When looking at the type of auto loan you want to consider, it’s good to look at both the base interest rate and APR (annual percentage rate) to help decide if it’s the right choice. Depending on the company you work with, one or both of these rates might fluctuate, drastically changing the final cost of your car. So, before committing to a car loan, it’s good to check out how these two rates will affect your total sum.
#2: Ask about the Loan Term Length
An auto loan can have a term period of anywhere from one year to seven years depending on a number of variables, including your credit rating, income level, and the dealership or lending company you’re working with. If you’ve been quoted a great low monthly payment but have a loan term of seven years, you can easily pay more than if you have a two-year term with higher payments. So before committing to a car loan, it’s important to learn of the length of time you will be required to make payments.
#3: Learn How Down Payments Affect Monthly Payments
For most dealerships, the more down payment you’re willing to offer when taking out an auto loan, the lower your monthly payment will be. In general, for every $1,000 you’re willing to contribute, your payment will lower by $50 a month.
#4: Ask about Prepayment Penalties and Demand of Full Payment
There are often circumstances associated with an auto loan that can make the experience no-so-pleasurable. For instance, if you want to pay your car off early, many dealerships charge penalties for doing so. Also, it’s good to find out under what circumstances a dealership can demand full payment. Learning this information can help you save face and money before committing to a car loan.
Taking out an auto loan requires knowledge of how your money will be spent. So before committing to a car loan, it’s good to find out just what you can expect financially.