Car Loans

Did you know that refinancing a car loan can make your payments more affordable and save you money over the entire life of the loan? It’s true, however you need to make sure you do it right or refinancing a car loan could end up costing you more money.

There’s no doubt that buying a new car is an exciting and stressful time. Many people get overwhelmed by the whole thing and end up being talked into more car than they need by the salesman. They fail to focus on their own needs and end up with a high interest rate, a high monthly payment or both. If this has happened to you, there’s a way out and that’s through refinancing a car loan.

You interest rate will vary based on many variables from the dealer to the state your in to your credit score to the lender and many other things. I’ve heard reports of people getting car loans for as high as 19% APR which is insane! You might as well finance your car with a credit card at those high interest rates. Your rate can be higher or lower based on the amount your financing and the length of the loan as well, but the best way to lower your rates are to do some shopping to find the best car loan for you.

If you’re already paying a high interest rate on a car loan then you do have several options to lower that rate. The best way to do this is by refinancing a car loan. There are immediate benefits because your monthly payments are lowered, but there are also long term benefits because you end up paying less money in interest to the bank. You can literally save thousands of dollars over the life of the loan by refinancing.

Think of this; if you financed a $20,000 car loan at 11.9% you can reduce the interest rate by just 3% you save yourself $2200 over the life of the loan. Larger loans and larger interest rate deductions will of course mean larger savings and this is when you really benefit from refinancing a car loan. Remember too that you won’t be refinancing the total cost of the car loan, but just the balance due, so your monthly payments will be lower yet.

Now it gets even better, because not only can you lower the payments, but you can also shorten the length of the loan meaning your cars value will be higher when you finally pay the loan off. Cars depreciate quickly, so a years less wear on the car can put several thousand more dollars in your pocket when you trade the car in.

When you do go to refinance a car loan make sure you know how they are calculating the interest. You want to avoid a simple interest loan because in this case they will be charging you interest on a daily basis on the car loan. Find out too if you can pay the loan off early or if there is a prepayment penalty for early payoffs.

You can refinance a car loan no matter what your credit history is like so why not look into it. Even if you save just $15 a month it’s worth it because there are no points to pay on the loan like with a home refinancing. Chances are that you’ll be able to save much more than this when you refinance a car loan though.

Because many people change cars as often as clothes the need for cheap car loans is pretty high. Even if you don’t switch cars this frequently you probably want to get the cheapest car loan possible when you do buy a new car. Well then how do you find a cheap car loan?

First of all, don’t simply accept the initial offer. If you do some research and check with various lenders you’re likely to find a better car loan. You’ll find that the competition in the car loan business is pretty fierce which makes it much easier for you to find cheap car loans and save money.

Here are 5 tips to make it easier for you to get cheap car loans.

Do Your Research

The fact that there is so much completion for auto financing works to your advantage. With so many lenders out there trying to get your business you are in the driver’s seat and can accept or reject whatever loan you like. The best way to find cheap car loans is by getting out there and contacting several lenders to get quotes. Then take those quotes to compare the interest rates, fees, terms and other features to determine which loan is the best for you financially. This step will take some time, but the results are well worth it. To save time with your research do it online. Online auto lenders will get you instantaneous quotes in many cases, saving you hours of time.

Improve and Maintain a High Credit Score

Getting a good interest rate on a car loan is a piece of cake if you have a high credit score. So, the first thing you should do before going car shopping is to check your credit score and make sure it is high. Anything over 700 should get you a cheap car loan. If it’s below that you may want to consider taking a few months to improve it or you could end up paying more than necessary in interest.

It’s actually pretty simple to improve your credit score, it simply takes time. Pay all your bills on time and close any unnecessary accounts. Check your credit history to be sure there is nothing on there that doesn’t belong. Remember, the higher your credit score, the lower your interest rate and this applies to all kinds of loans, not just car loans.

Have a Trade-in or Large Down Payment

These will help you get cheap car loans in two different ways. First of all, the more money you’re putting down on the car purchase, the less you have to finance and that means lower monthly payments. Plus, many lenders will offer you a lower interest rate if your down payment is large enough. So, your down payment does double duty.

A trade-in functions pretty much the same way as a down payment, decreasing the cost of your new car purchase. Sometimes you can get a good trade value from the dealer, but you may be able to do better if you sell your old car privately.

Get Your Car Loan Before You Go Car Shopping

Most if not all car dealers offer some sort of financing, but that doesn’t mean that it’s good financing. Now I’m not saying you can’t get cheap car loans from an auto dealer, but chances are you won’t get the best deal on a loan from them. Additionally, you’ll be in a much better position to negotiate the car purchase if you already have financing since the car salesman will see you as a cash buyer. This alone can save you a couple thousand dollars on your next car purchase.

Don’t Let the Salesman Talk You Into Things You Don’t Need

Car salesmen make their living on commission from selling cars. This by itself should tell you that the salesman doesn’t have your best interests at heart when they are suggesting add-ons and upgrades to your vehicle purchase. Often the salesman will try to upgrade you to a more luxury model, but consider carefully how this will impact your budget. If you want to get cheap car loans you may need to exercise some willpower when dealing with the car salesman.

If you’re like most people you need to take a carloan when purchasing an automobile. It doesn’t matter if it’s a new car or used car that you’re buying, in either case you need to make sure you can afford the monthly payment on your carloan. Let’s face it, you’ll be paying that loan for quite a few years so it’s best to make sure that it fits within your budget.

There are 4 basic ways to get a carloan. All 4 cases will work for most people, but in all cases you’re going to get the best interest rates if you have a good credit history. Whenever lenders feel you can be relied upon to repay a loan they will offer you better terms and rates. Here are the 4 basic ways to go about getting a carloan:

Banks – Banks are one of the first places many people think of going to get approval for a carloan. Of course banks are experts at lending and they are often a good place to start your search for a carloan with a great interest rate. Keep in mind though that the better your credit history is the better your chances will be of getting approved for a carloan at a bank.

The best bank for you to apply at is one that you already have accounts or loans with. Many times they will offer better terms on carloans to existing customers because they already have a good idea of what type of customer you are. However, don’t stop here, banks are just your first stop searching for the best carloan.

Credit Unions – Credit unions are similar to banks with the exception that they are private lending institutions whereas banks are public lenders. Credit unions can offer very good terms on carloans, but usually they only want to work with individuals that have very good credit records. They don’t like to take on risky loans so if you have bad credit a credit union may not be the best place for you to get a carloan.

Car Dealer – This is where many people end up getting their carloans since it is so easy to simply apply for the loan where and when you’re buying your car. This can really work against you as the dealership knows that once you’re emotionally attached to the car they can get you to take financing that may not be as good as you could get elsewhere. Car dealers interest rates can vary widely and some will even pad the rate to get a higher commission from the lender.

On the other hand, car dealers want to sell you a car and if necessary they may be willing to negotiate more than banks or credit unions. The dealers can also get creative with your car loan and have access to many different lenders when trying to get you approved. See what kind of rate the dealer is offering, but don’t make the dealer your only source for a carloan.

Online Lenders – In the past few years online lenders have become very popular for carloans. Because they don’t have the high expenses of offline lenders they can often offer very low rates and are quite competitive when it comes to offering carloans. Plus, once you’re pre-approved for a carloan from an online lender you’ve got more room to negotiate with the car dealer as they now see you as a cash buyer.

Finding carloans for any car can be quite simple once you know where to look. Begin with a realistic budget and shop around to several types of lenders so you can compare carloans and get the best deal. Shopping for a carloan is really no different than shopping for the car itself and you should take advantage of the different options available to you.