Getting a car solves so many life problems. You can get to your destination faster and more conveniently on your own vehicle as compared to public transport. However, the process of buying a car can take a toll on you, if you are not careful.
It is not a first to hear of people taking loans to finance their car purchases. The price of cars differs based on the model of the vehicle, whether it is new or used, among other factors. Once you know the exact car you want, raising the money to finance your purchase is the hassle.
Vehicle loans can quickly get out of hand. This is especially so for people who negotiate a loan with car dealers. They are very good at squeezing from clients as much money as possible. The interest rates are even higher than those of banks, not to mention, the long stretch of the loan that will be more expensive in the end. In that case, how do you cut down the cost of your vehicle loan to save some money? Find out below:
Work on your credit score
Your credit score will determine the terms set for you on a vehicle loan. Working on your credit score merits you lower interest rates on your loan. The repayment history of your credit is how you can perfect your credit score. If you have a clean record of timely repayment, then your interest rates will be lowered during the terms of the vehicle loan. This also means having a history in the first place. Make sure you use your credit card and pay off when you can. This is how to build a credit score.
Don’t ask for little money
When asking for a loan, people tend to be hesitant about the amount they request for. It is obvious that small loans are easy to pay off than big loans are. However, a small loan attracts larger interests. Technically, banks make money from loans through interests. For this reason, they do not want users to pay up their debts quickly. Since short loans are almost always paid quickly, a hefty interest is charged to profit the bank. The bigger the loan, the lower the interest charged, and the more money you save.
Refinance your vehicle loan
Similar to home mortgages, refinancing can help reduce the monthly payments you have to make through the life of your vehicle loan. It works by extending your loan repayment period. It is also the perfect way to reduce the interests charged for the loan. Assuming you settled on a big loan to lower the interests, refinancing into a loan with a lower interest than what you are paying can save you a lot of money. However, before you make this move, make sure your current vehicle loan does not have a prepayment penalty. You also have to ascertain that you are not underwater with the repayment of the existing loan.
Pro tip: cars depreciate very quickly. It is why you want to be proactive with checking the free VIN decoder to confirm the worth of the car. If you are not careful, you may end up owing more money to the bank than your car is worth. This would be a major setback for the refinancing idea.
Don’t get your loan at the dealership
Most car buyers make the mistake of stopping at the car dealership when they are looking into auto loans. A car dealership will siphon a lot of money from your pockets by elongating your loan repayment period. You also must understand that a car dealer is a middleman between the car manufacturer and you. It is okay to shop for the car you want, but don’t shop for car loans from the dealership. A bank is so much better, especially if you want to save up on the profits.
Shop for the best deal
Like you would shop for the kind of car you want from different car dealers, do the same for vehicle loans. Vehicle loans differ from company to another, and even in banks. Don’t settle on the first loan you land on. Ask around and consider the terms of repayment before you make your final decision.
Buy a cheap car
The amount you spend on a car should not be overly exaggerated. Even though buying a vehicle from top brands will give you the status quo you want, it may be too expensive. One easy way to save money on your vehicle loan is to buy a cheaper car. Buy what you can afford. This will mean a lot to you if you consider the depreciating value of vehicles. You also have the option of buying a pre-owned model of the car you want it will be a lot cheaper than buying a new one. Bottom line, consider your needs of buying the car. If the idea is to ease your transportation to and from work, then you do not need to go overboard in spending for an extremely expensive car.
Aarvi the owner and senior content publisher at Financeclap. Aarvi completed his education in BBA (Bachelor of Business Administration), and recently she was working as an assistant manager for the accounts company. She also works as a senior digital marketing consultant for one IT company in 2018. The main idea for starting Financeclap is to provide the best and helpful information related to the business industry to the readers. Aarvi main hobbies are playing cricket, watching videos and listening to music in the free time. You can learn more about her on about us page.