The 5 Biggest Car Finance Loan Mistakes

A new car may be too expensive, that’s why most people look into a car finance loan. However, before you get excited about the first car loan you’re offered, remember that a loan is a long-time commitment and can considerably cost you in the long run. Research first for the auto loan that is best for you.

There are 5 common auto financing rookie mistakes, learn what they are and avoid them.

  1. Not researching your options – The conditions of your car loan vary among different dealers, manufacturers, banks, online lenders and credit unions. Some won’t require very high credit scores but may offer you high interest rates and shady terms. Begin by doing your homework by applying for a no-obligation auto loan.

  2. Going by monthly payment alone – Any loan can have affordable monthly payments if you stretch it out long enough. The end result is an outrageous total amount paid for a not-so-great car.

  3. Going by interest rate alone – Remember that even if you get a pretty good deal on an auto loan, you’ll still have to come up with a down payment. If you take a slightly higher interest rate, the down payment may decrease significantly, making that new car a more feasible option if you don’t have a lot of cash to shell out up front.

  4. Not reviewing your credit score first – Your interest rate and whether or not you qualify for a loan will depend on one single item: your credit score. Find out where you stand, correct any mistakes, and update your information. A few points on your credit score can be the difference between you qualifying for a 0% and 5% APR.

  5. Stretching yourself out too thin – As a rule of thumb, your auto loan monthly payment (for all cars you own) should never exceed 30% of your monthly net income. Find the car you can afford so you won’t have to start counting pennies at the end of the month.

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