The time has come to buy a new car. As you start browsing online sites and visiting local car dealership lots, you may realize there's more to think about than just the make or model of your new car. You'll also need to determine what amount fits your budget and find the best financing options to pay for it. There are a variety of places you can shop for the best terms. Auto loans are financed through banks, credit unions and non-bank automobile manufacturer financing units.
Typically, financing is in the form of an installment loan ranging from two to seven years. If you can make a down payment, the total financed amount and, in turn, the monthly payments will be lower.
After the down payment, you’ll finance the remaining outstanding balance. Over the repayment term you’ll pay off the original loan, known as principal, as well as the interest, which is a percentage of the principal, every month. An online calculator can help gauge the potential costs of a loan based on the interest rate and length of the loan. Running the numbers can serve as a reality check on what’s within your budget, and how the payments change with different interest rates.
Keep in mind that your credit score is an important factor in determining the interest rate you receive for the loan. Generally speaking, a lower credit score results in a higher interest rate. Ideally, you should know your credit score before beginning the financing process.
Auto loans can be a fixed rate, which means the payment is the same for the life of the loan. Your interest rate and the length of your loan impact the affordability of your monthly payments.
When purchasing your next car, be sure to understand the entire cost and duration of the loan and the loan process, so you can make the best financial decision.
You'll find additional information regarding consumer lending and your rights as a borrower.
