Buying a Car is a dream for some one who does not have it. If you buy it fully at your own then there are a lot of things to consider. These days its not a desire but a necessity for many people. Those who have the cash are generally financially well established and mostly they already have bought one.
Professionals at entry level of their career or college students generally buy it for the first time. They usually don’t have the required cash and have very meager or no Credit history to qualify for car financing.
Type of Car to Apply for
There are certain advantages in Buying new Car rather than applying for a used one. Used Car apparently costs much less than a new Car. In fact, after first year the value of a new Car can decrease by almost thirty percent. However, the interest rate for a used Car is much higher than the new Car mainly because of decreased resale value and the risk of loss to the lender, in case of the borrower’s default.
The maintenance and repairing cost can be high if a used Car is bought. Therefore, one has to be very careful in buying a used car. Although there are warranties offered on the parts but that is relevant only if one is Buying from a legitimate dealer. A private lender will make a lot of things complex by playing with the warranties to make things painless for him. Therefore, it is very important for novices to take along a mechanic for proper examination of the Car before Buying.
Down Payment Options
It is very important to consider down payment options. There can be offers with zero down payments but it can be disastrous in the long run. As a rule of thumb, cars should be bought if one can pay at least twenty percent down payments. There can be times when it’s very hard to manage monthly budgets with fewer down payments. The monthly installments can accrue to a value which the vehicle is not worth of.
A Car Loan deal is a very wearisome affair. Especially if some one has a very low Credit rating, he is new to the automobile industry and if he is going from lender to lender for a price quote. As a result, some people may get stuck on whatever the demand is. The best way to judge prices is to get online quotes. Many lenders offer their price quotes as well as that of other competitors. Therefore it is best to compare the quotes online. Usually lenders offer car loan calculator from which one can gain an insight to the total monthly installments one has to pay.
There are many other factors one has to consider before applying for a car loan. These directly pertain to what sort of life style he is living. Getting a Car Loan is one of the most important financial decisions in a person’s makes life, therefore, it should be given due contemplation.
1. Check your Credit
You can easily check your Credit using a budgeting app like Mint or through other online sites. If you don’t have a Credit score or yours is below 670 — what most lenders consider to be good Credit — you might want to consider applying with a cosigner.
2. Go over your budget
Specifically, figure out how much money you have available after covering essential costs each month, such as bills and food. Use this number to help you figure out how much you can afford to repay each month on your Car Loan. Ideally, you should leave yourself some wiggle room for miscellaneous purchases and emergencies.
3. Compare cars
Use online sites like Kelley Blue Book or Edmunds to figure out what type of Car is in your budget and what you like. You can use this to narrow down dealerships — or decide if you even want to buy from a dealership. If possible, check how much different sellers are charging for that Car so you have a solid basis for negotiation.
4. Put money aside for a down payment
If you have the time, make sure you save up to make at least a 20% down payment. This will save you in both the short and long term. A smaller Loan amount means lower monthly repayments — or an interest-saving shorter Loan term. And you won’t have to ever pay interest on the money you pay up front.
5. Compare lenders
Start by looking for lenders that can finance the type of Car you’re interested in and that you — and your cosigner — can qualify with. Then compare rates, terms and Loan amounts to find the best deal.
Once you’ve narrowed it down to a handful of options, consider prequalifying with a few to see what types of rates are available to you. This typically won’t affect your Credit score since it doesn’t involve a hard Credit check.
6. Get preapproved
Getting preapproved with a lender is almost like getting the Car Loan — you’ll know exactly what rates and terms you can get, but you have between 30 and 90 days to shop around. You’ll go through a hard Credit check that can lower your Credit score and submit documents verifying your identity and finances.
Once preapproved, you can use that quote to negotiate with a dealership for a better deal. Can’t get a better deal? You can still sign those original Loan documents.
7. Buy your Car and sign the documents
You’ve found the Loan, you’ve found the Car. All you have to do is sign the paperwork. You might want to check out our guide to car loan scams so you know what red flags to watch out for. And since it’s your first time, it might not hurt to bring on an experienced borrower to help assess the situation.
Should I use a first-time Car buyer program?
Some dealerships offer first-time buyer programs that make it easier to qualify for a Loan. The terms offered and eligibility criteria differ between lenders, but you may be able to borrow a Loan for your first Car that you might not have otherwise been able to borrow.
They might sound like just what you need when you’re unsure of what you’re getting into. But you might not always get best deal. Some programs might rush you into Buying when you might benefit the most from waiting. Others might steer you toward higher-interest financing options. Vet the program before you sign up.
Types of loans available to first-time Car buyers
- Car Loan with a cosigner. If this is your first time borrowing, you might have an easier time qualifying if you apply with a cosigner.
- Student Car Loan. Some lenders like Boro offer auto financing specifically for students. Instead of considering your Credit score and monthly income, these lenders typically look at your overall financial health and academic record.
- A secured personal Loan. With a secured personal Loan, you can use other assets besides a Car as collateral and borrow more, but still get the same competitive rates.
- Unsecured personal Loan with a cosigner. Don’t want to risk losing your Car? Consider an unsecured personal Loan. Keep in mind that you’ll typically need good Credit and might need to bring on a cosigner to qualify.