For many people, getting a car can be a tremendous milestone in their lives and when it comes to work or family, having a vehicle isn’t just a nice perk; it’s often a necessity.
However, cars are expensive, and it’s common for people to have issues affording one, which is where car loans come into play.
Here’s a basic overview for those who’ve never financed a car before.
What Exactly Is Car Financing?
Car financing is when someone takes out a loan on a car so that they can afford to buy it immediately instead of having to save up for it over time.
A contract is made between an individual and a lender to pay off the car loan over a certain period of time with an established rate of interest. Typically, the loan will be repaid in monthly installments over the course of several years.
There is a multitude of financing options, with different mixes of down payments, monthly payments, interest rates, and loan terms. Which options are available to people is heavily dependent on a long list of factors, such as income level and credit history.
What to Look for in A Financing Package
Which financing package is most appropriate isn’t necessarily obvious as there are lots of important variables to consider.
The seemingly cheapest option may seem like a safe choice, but that’s not necessarily the case. Smaller down payments or interest rates can potentially save money in the long-run, but it’s common to get better terms on cars that aren’t the best quality.
Cars that have a reputation for requiring excess maintenance or have terrible gas mileage will end up costing more in the end, even if the loan terms are more favorable.
Looking at a credit score will determine what loans someone qualifies for. If their credit is low, then they should be prepared for potentially bad options. However, car loans can still be a viable choice, although higher interest rates or down payments may still be an issue.
When looking for loans, reaching out to as many lenders as possible through their pre-approval process will create a good overview of the options available.
Refinancing A Loan
Even in the event that someone picks a car loan they’re unsatisfied with, and even if they have bad credit, it’s entirely possible to get their car refinanced. According to Lantern by SoFi, a popular online loan marketplace, “You may be able to refinance with bad credit if you have a positive track record of making payments on your current loan and/or have a cosigner.”
There are several benefits to car refinancing options, such as lower interest rates or monthly payments in addition to avoiding dealing with unsatisfactory lenders.
Affording A Car
Cars might be expensive, but they’re often necessary, and there is a wide range of options available to most people to help them afford one.
Ultimately, it’s important to keep track of all the little details that will make a tremendous difference down the line.