Millions of Americans buy a car (new or used) each and every year. And it would be safe to say that many of those purchases would be made with the help of a loan from a bank or other lender. While loans are beneficial in that they enable people to buy a car in the short term that may not have otherwise been possible, caution needs to be exercised and loans need to be used responsibly.
Here are some tips to help when taking out a loan to buy a car:
- Work out what your budget is. In particular, if you haven’t used finance before then spend six months putting aside the repayment amount to determine whether you commit to regular monthly repayments needed for the loan (when you get one). By the end of the six months you will have a substantial deposit for the purchase of the vehicle and you will have the confidence in your ability to pay back the loan.
- Be aware that the interest rate on a loan may differ between new and used cars. However, you should consider how much you want to spend considering the depreciation on new vehicles against the mechanical worthiness of a used car before deciding which option to take.
- Shop around for the best deal. Lenders want your business and they are offering great deals. Get at least 2-3 quotes and compare to see which offers the best deal.
- If you are worried about rising interest rates, and to take advantage of low interest rates right now, find a loan with a fixed interest rate and lock in your repayments.
The better your credit history, the better deal lenders can offer you. Make sure you pay back all your credit on time to build up a good credit history. But if you have a poor credit history don’t despair as there are many lenders who will provide you with a competitive loan too.
