shopping for a car loan

28 Sep

5 Things to Look for When Shopping for a Car Loan

5 Things to Look For When Shopping For A Car Loan

Getting a new or used car is a huge investment. Make the most of that investment by understanding some of the important things to look for when shopping for a car loan.

It’s tempting to shop based on monthly payments, but don’t forget how much you’d be paying over time and how long you’d be paying off your car. Remember, the car isn’t truly yours until you’ve paid off your lender!

So, before you say yes to that dream car, shop around for financing that best suits your needs. Here are 5 things to look for when shopping for a car loan.

  1. Good APR. APR is the amount of interest accrued on your loan each year, and the higher the rate the more you will owe in total. For example, if your loan is $10,000 but your APR is 7%, in 5 years you’ll end up paying nearly $2,000 in interest (in addition to your loan amount). Usually, the better credit score you have the better APR you will qualify for, but it’s still best to shop around and see what your options are.
  2. Manageable Monthly Payments. Don’t push your budget, and make sure your monthly payments don’t strain your income. Try shopping for more affordable vehicles then choosing a “dream car” that forces you to recalculate your monthly budget. If you can only afford to pay $200 a month, don’t waver!
  3. A Reasonable Loan Term. Don’t get roped into a longer loan term just to get down to a monthly payment you can afford. Be reasonable about the total amount you will be paying and the length of time you’ll be paying off the loan.
  4. An Affordable Loan Amount (Including Interest). Don’t forget to include interest in the total amount you’ll be paying over time. For example, a $10,000 loan at 7% APR over 5 years equals nearly $12,000 total.
  5. Prepayment Penalties. Talk to your lender to see if they impose any penalties or restrictions on paying extra monthly payments or paying off your loan early. Many lenders prohibit doing so to ensure you pay the maximum amount of interest. When shopping for a car loan, evaluate whether this is important to you as a consumer and factor that into your search.

Have any questions about what to look for when shopping for an auto loan? Give us a call today or swing by a branch!