Signing up for a car loan is one of the biggest financial decisions most people make in their lives. That’s why it’s so important to shop around and find the best debt consolidation rates when you’re buying a car.
Car loans are usually pretty simple, but there are some common mistakes that mistake car buyers can make. Here are some of the most common mistakes, and how to avoid them:
Getting a loan that lasts longer than your car does
It’s tempting to get a loan for six years when you’re buying a new car, but this is a tricky way to save money. If you do this, you’ll end up paying more in interest, because while it may feel like you’re getting a good deal on the price of your car, you’ll actually be spending more overall on payments and interest.
When you buy a new car, you may only need it for three to four years before it starts feeling dated or costs too much to drive. Instead, opt for a shorter term loan so that your monthly payment is a bit smaller, and so your car will be relatively new when you plan to trade it in for a newer model. You can check car’s VIN online with tools like Ford VIN Decoder.
Avoiding early payment penalties
One big mistake that many car buyers make is ignoring the fine print on their loan agreement. It’s important to read through all of your documents before signing, because most loans have fees if you try to pay them off early. Car loans are the kind of debt that lenders count on people ignoring, because they know that many people simply can’t afford to make those monthly payments for very long.
If you really want to avoid these fees, it may be best to look into getting a personal loan or an auto refinance deal instead of a car loan. With these kinds of loans, balance transfers can usually be done penalty free.
Check your credit score
A bad credit score can mean higher monthly payments or worse loan terms, so it pays to know where you stand before you start shopping for a car loan. Higher interest rates are the most common result of having a poor credit score, but you may also run into companies that won’t work with you at all if your score isn’t high enough.
When your credit history is less than perfect, it’s a good idea to shop for car loans first or last, so you can compare terms and conditions without having other offers clouding the picture. Some car dealerships will offer special rates to customers with good credit, so it’s also a good idea to check with them first.
Consider all your options
There are so many car finance options out there, as well as variety around what type of car you’re looking for. Whether you’re looking for a family car to take on weekend road trips, or are hunting for the best Subaru car finance rate, it’s worth taking your time to weigh up all your options and ensuring you’re getting the best deal possible!
