If you are in the process of shopping for a new or used car, you may be very excited about the possibilities. However, many consumers are so excited about buying a car that they overlook some important factors, and this can cause them to take out a loan that they can’t afford. Here are some considerations that you need to keep in mind before taking out a car loan.
[More from Manilla.com: 5 Financial Numbers You Should Know]1. Used or New?
As you are shopping for a car, you need to decide whether you want to buy one that is used or new. If you need a spare car that you will drive infrequently, then a used vehicle may be the best choice because it will cost less. You may even decide that an extra car is not necessary, which will save you thousands of dollars. If you are in need of a vehicle that you will drive every day, you can shop for a new or used car that meets your size and budget requirements.2. Budget
Your budget will be one of the most important factors to consider while you are shopping for a car. If you only have a few thousand dollars to spend and don’t want to take out a loan, then browse the vehicles in used car lots. If you have closely examined your budget and can afford a monthly payment, then you need to determine how large of a payment you can make. It is crucial that you are honest about your income and expenditures while creating your budget. In addition, you will need to factor in costs for insurance, registration, maintenance and repairs. Once you have decided how much you can pay, you will be able to narrow down your options considerably while ensuring that you don’t take on a loan that you can’t afford.
[More from Manilla.com: Financial Tracking & Budgeting Tips]3. Credit Score
If you are considering applying for a car loan, then you need to check your credit score beforehand. If your credit has taken several hits lately, then you may not qualify for the loan you need in order to buy the car of your choice. Your credit score will also determine how high the interest rate on your loan will be, which will affect your monthly payments. If your credit score is not where it should be, then you may want to delay your car purchase for a few months while you make some financial adjustments that will improve your score.
[More from Manilla.com: How to Get Credit without a Good Credit History]4. Car Loans
If you have determined that you have a good credit score and can afford to make monthly payments on your vehicle, you can start applying for car loans. As you shop for the best loan, take the time to read the fine print carefully. Pay close attention to the interest that you will pay and ask the lender about any fees and charges that may apply. If the interest on the loan seems much lower than the others that you have found, you need to make sure that you won’t be responsible for extra fees and charges.
When you are in the process of buying a used or new vehicle, it is easy to get swept up in the joy of shopping. However, you need to carefully review your budget, credit score and loan choices before you commit to buying a car. Your time and caution will ensure that you make the best choice for your finances.
Bill Akintoye works at Shabana Motors in Houston. The company offers in-house car financing options for people with bad or no credit and has a large inventory of used cars, trucks and SUVs.
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