If you want to get a car loan but don’t want to pay more than is necessary, there are a few things that you will need to keep in mind. There are lots of different ways to reduce the amount of money you spend on one of these loans, and it is crucial that you know what they are before moving forward. The more of this research you do, the easier it will be to pay back the money you borrow on time so you don’t get hit with all sorts of late fees.
Work on Improving Your Credit
Since your credit is going to play such a vital role in getting a car loan, you will need to make a point of seeing what it is currently like. Anyone who is interested in getting any sort of loan should make a point of looking at their credit report and finding out what their score is. By doing this you will be able to better manage your expectations when it comes to what your chances will be like of getting a good deal on a car loan.
If you find that your credit score is fairly low, it is definitely a good idea to do whatever you can to improve it. Keep in mind that paying off the loan you take out on time should help a lot with improving your overall score. The more time and effort you put into doing this before applying for a car loan, the lower your interest rate is going to be. This isn’t something that everyone will have the time to do, but it’s still something you should think about.
While it might very well be possible for you to get approved for a car loan with bad credit, you should try to increase your score as much as possible before submitting an application with a lender. The higher up your score goes, the more money you will save.
Don’t Borrow a Small Amount
Those who just need £1,000 or £2,000 for a car should avoid getting a car loan and instead just save up the money. The interest that you will end up paying on the loan won’t even make it worth it. You might have to spend some time saving your money, but in the end it will definitely be worth it. This is one of the biggest mistakes that you can make when it comes to getting a car loan.
Refinance Your Car
One of the best ways to pay less on your car loan is to refinance. This option can potentially lower your interest rate, which in turn will save you a significant amount of money over time. Refinancing isn’t an ideal option for everyone, but it’s an option that you should look into at least. The amount of money that you end up saving from refinancing will depend on how much your interest rate drops. If you are very close to paying off your loan, however, this might not be a good option.
Think Twice About Borrowing from a Dealership
Getting a car loan from a dealership is an effective way to pay more than you need to, so you will therefore want to think twice about it. A car dealership loan can come with a very high interest rate, so you will therefore want to make sure that you go to a bank or credit union first. While it’s true that people with bad credit can usually get a car loan from a dealership, the interest rates are usually outrageously high.
Leasing a car as opposed to buying one outright is an alternative that you should also think about, as it can save you quite a bit of money. By the end of the lease period you will be given the decision to buy the car for the remaining amount that you owe on it. A lot of people in the UK are leasing cars these days, and it’s something that you should at least think about doing. Leasing a car is one of the best ways to save money while still getting what you need.
Pay as Much as You Can Upfront
The larger the deposit you make on your new car, the less interest you will have to pay each month. Nobody likes having a high interest rate, and this is one of the better ways to ensure that yours is as low as possible. Take some time to save up money if you have to, but make sure that you do this. The last thing you want to do is not put anything down on your loan, because you will regret it. The lower interest rate will help you pay off your loan on time.
Consider a Home Equity Loan
If you need money for a new car and own a home, you might want to think about getting a home equity loan. This type of loan uses the money you have already put into your mortgage to help you get the extra cash you need to purchase a new car. Depending on how much equity you have in your home, this could be a great option to look into. You will be risking your home though, so it’s certainly not something that you should take lightly.
Don’t Rush into Anything
The best piece of advice that you can keep in mind when it comes to paying less on your car loan is to not rush into anything. A lot of people get one of these loans without really examining their options or considering crucial factors that affect them later on. The more diligent you are about doing the necessary research, the better off you will be financially. Take all the time necessary to find a good lender who can provide you with a fair deal on your car loan. The lender you choose will make a big difference when it comes to how much you pay, so you should keep this in mind.