Buying a new car is an exciting experience. From doing the research to taking your new vehicle out for its first test-drive, there really is nothing else quite like the feeling of getting the keys to your new wheels. However, when it comes to financing your new vehicle, it can often be a time filled with uncertainty, especially if you are doing so on a budget.
Successfully financing a vehicle with limited funds, however, is far from impossible. With the various financing options available to consumers nowadays, anyone and everyone can find a way to finance a new car, no matter what their budget. In addition to conventional banks, consumers can finance a car from Latitude Finance and other online banks, which can help give you more options that are appropriate for their budget.
Continue reading to learn more about the various methods of financing a car on a limited budget and put yourself in the driver’s seat when shopping for your new car.
Know The Lending Basics
One of the best ways to get a car loan that suits your needs is to learn the basics of what is involved in borrowing money. Knowing how interest is calculated on top of understanding how this interest adds to the principal of your loan over time can help in getting you the best loan possible. By understanding how interest is calculated, you can pretty much forecast your monthly payment and better plan for your financial future.
Also very important is understanding how interest is determined. Typically, lending institutions are given a standard interest rate for anything that can be financed including vehicles. This rate changes depending on how you measure up as a credit risk. Creditworthiness is measured on a number of factors, including income and credit history and these factors can increase or lower the rate applied to your loan.
Understand Your Credit Report
One of the most crucial elements of financing a vehicle is your credit history. Typically, the four main credit reporting agencies allow consumers one free report a year, which lists your financial history. Your credit report can have a big impact in determining the interest rate and whether the application is approved or not. For this reason, consumers should check their credit report to see irregularities that may appear on the report and address any concerns.
Consumers should also have a basic understanding of the information in the report. Most reporting agencies list all of your accounts, in addition to the status of each individual account. Late payments are listed as 30-60-90 past due, and if the bill goes delinquent, it is considered as a charge off. These delinquencies do impact creditworthiness. Furthermore, if you have applied for credit in the last few months, every time a financing company accesses the file, it lowers the rating. This information is very relevant to determining both the interest rate if the application is approved, which can impact your overall payments.
One of the best ways to budget for financing a vehicle is to get pre-approved for a loan. During the pre-approval process, the lender will ask you to submit information related to your present and past employment, tax information, outstanding debts and the credit report, which they will access.
Pre-approval is the best way to budget how much you will apply for because this information allows lenders to assess not only your creditworthiness but also exactly how much money you can borrow. For you, the pre-approval takes the worry out of determining how much you can afford to spend because you are given an exact amount based on all the above factors.
Finance Your Next Vehicle With Confidence
Securing financing for a vehicle in this day and age is a much easier process than ever before. More significantly, it is a less intimidating than it used to be due to the number of online tools available to the consumer that serve as great resources and make the entire process run smoothly. Remember, much of the work is in understanding lending language and snagging a pre-approval letter that allows you to shop on your budget. Armed with the right knowledge and information, you will be in the best position to secure financing for your next vehicle with confidence.