If you’re in the market for a new car, you may be considering your financing options. In today’s economy, many people do not pay for cars with cash. Instead, people may look to obtain car loans through financing and pay the loan back in monthly installments.
While you’re crunching numbers, it may be helpful to review the following facts about obtaining financing for a vehicle. The more you know, the better prepared you’ll be to get the best financing for your quality used car.
Credit Scores Are Important
It’s important to remember that your credit score can provide a general financial profile. Various questions may be answered by reviewing a credit report. Have you paid your past debts back in a timely manner? Do you have a high debt-to-income ratio? How long have you been working on establishing your credit?
Your credit score can also make a difference in the interest rate you’re given and the amount of money you’re allowed to borrow. If you have low debt compared to the pay you bring home, you may qualify for a higher car loan. If your debt-to-income ratio is high, you may be awarded less money in a loan.
Shorter Terms Can Offer Better Interest Rates
Sometimes, a shorter-term loan can offer you better interest rates. A lower interest rate is often worth pursuing, as it can save you money in the long run. If it’s possible, look to obtain a loan for payback in three years instead of five. When pursuing a short-term auto loan, though, it’s important to be sure you can afford the monthly payment.
When purchasing a car today, many people are choosing to finance their car loan instead of paying in cash. Knowing the importance of your credit score and choosing a short-term loan are tools for getting the best loan possible.