Very few people can afford to buy a car without a car loan. The car loan business is probably the main driver of the entire automotive market for both new and old vehicles. It becomes a problem when individual buyers spend very little time thinking about the deal they are getting or ways in which they can get more for their money.
Interest Rate
The interest rate is the main element that makes a car loan worth it or not. Even if the monthly payments seem manageable, the interest rate determines how much more money you will need to pay the lender on top of the value of the car. What you need to do is to think about deals, offers, and ways to reduce the interest rate.
A simple approach to reducing the interest rate is to come with a higher down payment. Banks and lenders are more likely to offer a lower interest rate as the down payment is proof of your ability to pay back your loan.
Another important factor for any car loan is your credit score. If it is low enough, some lenders may not even want to have you as a customer. Raising your credit score can be achieved in several ways and it may be worth it to postpone your new car purchase for a couple of months to increase your score which in turn may save you thousands of interest payments.
Monthly Installments
The very first thing that should be on your mind when you get a car loan is to pay it off as fast as possible. You can set higher monthly payments and reduce the loan period but you want to have some breathing room. Make sure that the monthly payments do not put you in an uncomfortable position. Whenever possible, try to make extra payments. Those extra payments will be deducted from the principal and you will no longer pay interest on that amount.
