How to get a car loan?

Everyone has a dream car that they would like to own. But not everyone has the money to buy the car. Those who do not have the cash to buy a car need not fret. They can opt for a car loan to buy the car. A car loan helps in getting finance to purchase the car you like. You can repay the loan over a period of time.

People get discouraged with the idea of going for a car loan, as they feel the process is cumbersome and they may not be eligible for a loan. But the fact is it is not so difficult to get a loan to buy a car. Let us see how to get a car loan easily.

Understand how it works

You have to make a down payment for the car. This is a percentage of the total car cost. It may range anywhere from 10-25% of the car value. Remember that if you do not have this money, it will be difficult to get a loan to buy the car.

Once the loan is sanctioned, you will sign a contract with the lender or lending agency. The contract tells you how much interest you have to pay, the total duration of the loan (term). Based on the interest rate and term, the per month payment is calculated.

For example, if you want a loan of $40,000 for a period of 4 years and the interest rate is 4.59% (which is the standard rate), then your monthly payment would be $914. You know how much you have to spend per month and can decide if you can afford this.

Check your credit

The first thing you need to do is find out your credit score. This is a measure of your creditworthiness. If you have a good credit score you can get a loan on good terms. Even if you do not have a good credit score, there are still many lenders who would sanction a car loan.

Decide the car

Before you start the loan process, decide which car you want to buy. Make sure you are clear about the manufacturer, make and model. This will help you know the full price of the car. This is the starting point of your loan process. A second aspect involved is knowing how much money you can afford to spend per month. Don’t go for a loan with a high monthly payment, which you will struggle to repay.

Look for various options

Don’t stick with one agency. Look at various lenders. The car showroom would be able to help you. It is advisable to contact different agencies, including your bank. Shop around so that you can get the best offer. Negotiate to get the best interest rate and the loan term of your choice. Try to get the monthly payment reduced as much as possible.

Look for a preapproved loan

A pre-approved loan means your loan is approved by a lender even before you approach the dealer. This helps you to negotiate the car purchase process in a better way.

Process the loan

Apply for the loan, fill in the form and make sure you provide all the details asked for. Your financial information and required documents have to be submitted. Once the loan is sanctioned, you need to pay the down payment and take home your car. Of course, make sure you pay the monthly amount so that the car can become yours once the loan is cleared.

Getting a car loan is easy. Decide a budgeet and try for a preapproved loan. There are many lenders in the market who would be happy to give you a car loan.