If you’re in the market for a new car, chances are, you’ll also need a car loan for your purchase. Car shopping that includes looking for a loan can be frustrating if your finances aren’t in line. Your credit score, your debt to income ratio and your ability to supply a down payment can all affect the terms of the car loan offered to you. The experts at Car-Title.org stress the importance of keeping your credit score high, so you can be offered a helpful and affordable car loan for your next new car purchase. Below, you will find a list of ways your credit score can affect the loan you’re offered once you find your dream car.
Auto loan terms –The terms of your auto loan, including the length of the loan, can be determined by your credit score. If your credit score is high, you’ll have negotiating power on the length of the loan. The experts at Car-Title.org remind all car buyers that the shorter your car loan term is, the more expensive your monthly payments will be. However, a short loan term also means you’ll pay off the car much faster and eliminate the need to make those monthly payments sooner. Generally, car loans are set for four to five years of payments, but the bank’s decision on your car loan term will depend on your credit score at the time of the loan application.
Your interest rate – One of the most important factors of your car loan attainment is the interest rate the bank or financing company offers you. Essentially, the interest rate is the profit the financial institution will make off your loan, and doesn’t contribute to the purchase price of your vehicle. Therefore, car buyers want the lowest interest rates possible. According to the team at Car-Title.org, the only way to get the best interest rate offer from the bank is with excellent credit. If your credit score is high, you have more negotiating power for the interest rate offered to you. If your credit score is less than desirable, the bank has less trust in your ability to make payments. Therefore, the bank will make up for taking this risk by offering you a loan with a high interest rate. Keeping your credit score high and healthy will allow you a better loan offer with a lower interest rate, so you’re not spending money needlessly when purchasing your new car.
The amount of your down payment – If you don’t have much to put down on your new car, a high credit score will be pertinent to obtaining a deal. Car buyers applying for a loan with a low credit score are usually required to put down much more money up front. This can make obtaining a car loan impossible for buyers, which stresses the importance of building good credit before obtaining a car loan. The experts at Car-Title.org suggest putting down as much as you can for your new car if you want to keep your monthly payments low and your loan term short. However, if you can’t afford to offer a big lump sum up front on your purchase, your credit score will be the most helpful when you obtain a loan offer. A small down payment is usually only allowed by the bank if your credit score is excellent or good.
Your monthly payments – Ultimately, your credit score will affect the monthly payments you’re responsible for when obtaining a car loan to purchase your next vehicle. The team of experts at Car-Title.org stresses the importance of maintaining a strong and excellent credit score because it can dictate the monthly payments you’ll make after the purchase of your next vehicle. If you have your heart set on a certain type of vehicle you want to buy next, your credit score can be the main factor that determines your ability to purchase the car. Keeping your monthly payments low and affordable is vital for maintaining a monthly budget, and one of the best ways to ensure a low monthly car loan payment is with great credit when applying for your loan.