No matter how your financial life is going, your car will breakdown when it is ready. Unfortunately, one of those breakdowns could be the one that signals it is time to buy a new car. Taking on a payment is never done lightly and is often a dreaded occasion. Here are a few ways to keep your next auto loan more manageable.
- Fix your credit if possible. No late payments, do not go over your credit card limits, make more than the minimum payment. Above all else, check your credit score once a year and fix any incorrect information.
- Avoid small loans. While experience with an auto loan will boost your credit score, small loans come with higher interest rates so that a bank can make enough of a profit for the loan to be worth its while.
- Refinance your current loan. If your car is fine, but your monthly budget is killing you, you can save a decent amount per month. The monthly savings are nice, but the real advantage to refinancing is to drop the total interest you pay over the life of the loan. People who had subprime credit at the onset of the loan may be able to drop as many as 6 interest points and save thousands in interest.
- Never take dealer arranged financing. The dealer gets a cut from the lender if they are able to get you to agree to a higher interest rate. A dealer will not tell you this, they will simply tell you that your loan was approved at X% interest and most people think that is their only option. It is not. Secure your own financing ahead of time.
Handling a new auto loan properly can keep thousands in your pocket and making a little more room in your monthly budget can save many headaches. Aren’t you worth the effort?