Having the blemish of repossession or bankruptcy on your credit score will put you at a disadvantage. It will prevent you from getting lower interest rates for a long time. So, do not be a Show-Off. Learn what kind of car you require. Find out who all be driving your vehicle, and then shortlist a few models that match your budget. Be the Prudent Guy!
2. The Payments Guy
When you are only worried about the monthly payments on an auto loan, you stop looking at the big picture. The Payments Guy is only concerned about the lowest monthly payment amount. But a small payment amount does not translate to better savings.
Lenders often attract customers by offering smaller monthly payments over extended loan terms. It means the car buyers end up paying more money in the form of interest rates. Additionally, you also run the risk of an upside-down car loan situation. For example, the total loan amount after deducting the down payment is $20,000. You opt for a loan term of 60-months with an interest rate of 8%. The monthly payment amount will come to $405.53, and you will pay an interest amount of $4,331.67%. Now, if you request the lender for a lower amount of $350, your loan term will extend to 72-months, and you will have to pay a total interest of $5247.87.
Do not focus only on the monthly payment. Instead, discuss the loan term and APR as well. Find out if there is any pre-payment penalty involved or not.
3. The Lone Warrior
The Lone Warrior is a car buyer who sets out to buy a car on his/her own. The car buying process is a complex one. It can be overwhelming, especially when you are making it on your own. Emotions can come in the way of making prudent decisions. It always best to bring a friend when shopping for a car. It helps to have a third set of eyes so that he/she can be objective in your process and ensure that you make the right financial decision.
Often, the Lone Warrior believes in taking care of the financing process of their own. However, it is a fact that having a co-signer helps in getting quick auto loan approval and better interest rates. So, convince your colleague, friend, or family to become a co-signer for your auto loan and enjoy faster pre-approval.
4. The No-Savings Buyer
The auto financing industry is built on the truth that car buyers do not have sufficient money to fund the vehicle. However, it is a wrong move to opt to buy a car with zero savings. Even if you do not have money to make a down payment of 20%, it is wise to save up money for car-related emergencies such as fuel-change, repairs, and maintenance. It will ensure that you do not seek out exorbitant personal loans to take care of your car.
When you decide to buy a new car, consider the amount of monthly payment that is comfortable for you. Set aside the payment amount of at least three months so that you can make regular payments even if your income source is affected due to any reason. When you do not have money for a down payment, you can always apply for zero down payment auto loans, but when you do not have savings to fall back on in times of emergencies, it will affect your credit score terribly.
Say No Terrible Auto Loans and Bad Credit Score
As discussed earlier, your car buying decision has the potential to build your credit score. If you make cautious and practical choices, you will enjoy the best interest rates for years to come. But, if you choose the emotional option, it may affect your financial situation severely. Say no terrible auto loans and avoid the troubles of a bad credit score by becoming a prudent car buyer.