How to Fit Auto Loan Payments into Your Budget
Are you looking to purchase your next vehicle? It’s important to find not only the car with the right features, but also the one with loan options that work with your financial situation.
Here are ideas on how to get an affordable auto loan that fits your budget:
Know how much you can afford to spend on a car. To decide on the maximum amount you can pay for a car, check your existing monthly budget first. Look closely at your monthly income and expenses to determine a dollar amount you could realistically cover every month over the life of the loan (usually 4+ years) and don’t spend over it. Don’t forget to consider the cost of gas, car insurance and general maintenance costs. If it’s possible to reduce other unnecessary expenses in your budget, that can also help you have more money to put toward a vehicle.
Be aware of your credit. Lenders take your credit score and history into consideration when they determine options for rates and terms. If you know where your credit stands, you may be able to negotiate for more favorable rates or terms.
Know your financing options. There are many lenders out there, and it’s smart to look around for the best price. Some lenders will let you know what kinds of terms or rates you could qualify for, which helps you focus your search.
Consider the length of the loan term. Auto loan terms often range between 36 and 84 months. With a longer term, you may have lower and more affordable monthly payments. However, consider that the longer you pay on a loan, the more it will cost in interest.
Get the most affordable insurance.Shop around for a policy that you can fit into your monthly budget. Experts recommend getting quotes from at least three insurance agencies before choosing.
What if I already own a car but need to cut costs?
Here are some options:
Reduce your insurance costs. There are a number of ways you could trim your insurance costs. Check for possible discounts, such as signing up for auto pay or bundling your car insurance with another insurance policy. You could also raise your deductible, or, if you don’t drive much, think about pay-per-mile insurance. If you aren’t able to find savings with your current insurance company, you can also look into switching to another.
Refinance. If your financial situation has improved since you took out your auto loan, you may be able to refinance your current loan for one with a lower interest rate — which could be a great way to lower your monthly payments (depending on term length).
Lendmark can help you drive away with an auto loan that fits your needs and budget. Go online to start your application, or visit us at your local branch.