Have you been looking for ways to save money on your used car loan? Did you know that not using the right tips can actually make you spend a lot than needed while buying a new car? The interest rates for a used car are often more than what you would pay for a new car. Moreover, the terms are also shorter. This is because even lenders are very skeptical about the used cars as it is a risky affair. This does not mean that it is impossible to take a loan for a used car. However, you should a way of financing that is suitable for your specific need. Here are some legitimate tips that will help you get the right loan for your second hand car.
Check your credit score
It is very important to pull a credit report while shopping for a car loan. The credit report has a detailed credit history which is very crucial. Check the reports and see if there are any accuracy issues. If so then you must flag them before it’s too late. How easily you get the loan will depend on your credit score which you must check. If there are any discrepancies then you must get them checked right away. Moreover, you should also have a less outstanding bill which significantly improves your chances of approval. After getting a statement of your credit, you are also advised to look at your credit score. If at all your score is below 650 then it means that you need to improve it. The first thing that the lender will want to check will be your credit score that is why you have to be very vigilant.
Fix a budget
Once your credit score is right and your chances of approval are high, you now need to look into your budget. A finance company will always tell you the maximum amount which you can take up as a loan. However, it is you who decides whether or not you can afford it. Narrow the loan down to the EMI you would be needed to pay on a monthly basis. It is advisable to always keep the EMI as 10% of your salary. Just because you want the car you should not be going broke. Once you set the right budget you can then factor in expenses like insurance, maintenance and gas. As a thumb rule, your transportation costs should never exceed 20% of your in-hand salary. The information which you would need upfront while shopping for a car loan is the monthly loan amount, the amount of down payment, anticipated interest rate, and the desired term.
Choose the Finance Option
While it might seem really convenient to approach a dealer, it is better if you choose the finance yourself. Begin by shopping at online banks as well as credit unions. In case you are already having an account with a good bank then check if they are offering any special offer for you. Your current bank already knows your credit history and would have that kind of rapport with you two. However, there are several other reliable banks that you can turn to if you wish to go for a used car loan. There are different types of rates as well as fees among lenders that you need to compare before choosing the best deal. Moreover, don’t choose a lower payment option since the term of your payment also matters. If the term of your loan is shorter then it means that the interest also will be less.
Thus, the above-mentioned tips will help you find the right option for your car. You must be really vigilant about all the options that you have since it is a one-time decision. Choose the financing option carefully and compare as much as you can. Try to do the research yourself rather than going to a dealer. Lastly, try and negotiate the deal if you can to save more.