Buying a car is a big decision, and it can be one of the most expensive purchases ever. Usually, car deals are made by financing it by taking a car loan. Getting a loan for your car will be the best thing for you as these loans are often easily availed at lower interest rates.
However, there are a few things that you need to consider to make your car financing a successful venture for you. From calculating your credit score to determining an affordable EMI, you must go through a few things before applying for a car loan. Here’s a rundown of a few such points of consideration:
5 Factors to Consider Before Financing Your New Car
#1 Evaluate Your Credit Score First
Your credit score is one of the most influential factors in getting a car loan. But, surprisingly, it isn’t as easy to compute your credit score as it may seem to be. First, you must ensure that the credit report you’re referring to has been updated in the last 30 days.
You can use a car finance calculator available online to calculate your loan figures. It will give you an accurate calculation about everything including the loan amount, tenure and monthly EMI.
#2 Determine an Interest Rate
You must not just settle for a car loan with an interest rate of 15% because this may push you into tens of thousands of dollars in debt due to interest payments over the next decade. Instead, you must always look for a car loan with the lowest interest rate you qualify for and can pay back.
Besides, it’s also a good idea to compare interest rates and choose the best option that suits you best. Then, with a little research, you can get a car loan that will match your requirements with an affordable interest cap.
#3 Find an Accountable Car Dealer
You must find a car dealer who will be able to answer all your questions and provide you with a good deal. If you have found a good car dealer, then it is likely that you are on the right track to successfully finance your car.
If you are buying a new car, think about yourself, your family, and anybody else who may drive your new purchase regularly.
#4 Calculate Your Down Payment
The amount of your down payment should ideally be at least 10% of the car’s total value. Aside from this, it is very important to ensure that your down payment will ensure that you have enough cash to repay your loan in full when it comes down to it.
Are you looking for an SUV, a commuter vehicle, or something else? This will likely impact how much money you will pay upfront and what interest rate you will get after going through car financing.
#5 Make Sure You Can Handle the Monthly EMI
As a rule of thumb, you should never commit to a car payment higher than 15% of your net income or 10% of your gross monthly income. To calculate the EMI, divide the cost of the new car by its interest rate. The lower the figures, the more manageable the repayment will be.
Checking your overall credit score and the interest rate on your car loan makes it easier you to settle for the loan amount. Just make sure to choose a reliable car dealer who can give you the best possible deal which will suit all your requirements.