Guidelines on How to Search For Financing on A Used Car
If you are looking for a used car in the market, you will discover that financing a used automobile is not easy like financing a new car. If you encountered problems, the following are the tips that you can try for financing a used car:
Determine Your Credit Score before You Proceed to Dealership
Financing an automobile is not the same as having a mortgage. Remember that you can have your car loan approved even if your credit is bad. However, you will have a higher interest rate if you don’t have enough credit. Whenever dealership states that they offer low-interest rates, this means that it is available for someone with a FICO credit score of around 700. If you have a lower credit score, then you will be charged more.
Have the Financing Quotations
Before settling on one company or dealership, have the quotes from dealers who offer you the loan. Searching for the right auto financing company is like shopping for a bigger purchase. Compare the amount of money they allow you to take up the loan. Determine the period and the interest rate they are offering to you before signing any contracts.
Keep the Loan Term Short
With a short loan term, you will pay more but this will help you save money in the future. As you pay off the loan faster, this means that you can have a chance to pay less interest. It’s tempting to stretch your loan up to five years or more. But if you do it, you will have to pay more as your interest increases. Moreover, you will have a chance to deal with a car that isn’t worth its price.
Place as Much Down payment As You Can
For those who would like to buy a car, place 20% of the total car price as a down payment. Whenever you place more money down, it will be taken off on your loan. This can decrease the payments and the interest rate. As you put 20% down payment, it will help you save money in the future.
Pay in Cash Other Fees Involved
There are other fees involved in buying used cars like documentation fees and dealership fees. Moreover, you will have to pay for sales tax when you buy cars. Make sure to pay for these fees in cash rather than adding it in your loan for this will only increase the money that you owe. In the future, you will only have to pay more on the interest on the sales tax.
Have a Non-Recourse Loan
The auto financing company will repossess your car if you are defaulted in paying it. Your car will not be worth it on whatever is left on your loan, thus, you will now have a deficit. But having a non-recourse loan will protect you with the issue. During default on a non-recourse loan, you don’t have to pay the difference. Also, you don’t need to have an asset which is valuable enough to cover your loss.
Image credit: Used Car via Mikbiz/Shutterstock