Struggling To Finance A New Car? Here Is What To Do
If you’re having a hard time financing a new car, there are tons of things to do. New cars cost a lot more than used ones. Thus, before you even think about buying a new car, you should consider all options.
Conveniently, used cars are less expensive and might prove to be the better option if you’re cash-strapped. But an opposite to that is the fact that you’re getting a less reliable product. Ultimately, you should consider the pros and cons of buying new vs old. But since we’re talking about financing a new car, then we’ll focus on that.
Get A Car Loan
The most convenient way to finance a new car is through a car loan. This is probably the way most people buy new cars. Since a new car is much more expensive than a used one, chances are not everyone has the cash to do that. So what they do is take out a car loan.
There are a couple of things to know before you take a car loan. The first thing to know is that you will have to pay the loan back with interest. You will rarely if ever, identify a lender with a 0% interest rate. According to Nerd Wallet, the average percentage interest rate in the US for loans designed for new cars is 4%.
But if we look at it in more detail, we can see that the terms of the loan largely depend on your credit score. So that puts us nicely to our next point, which is…
Get Your Credit Score In Check
When it comes to taking any kind of loan, you can either be approved for one or get rejected. This largely depends on your financial power. In short, there is a number that you need to pay attention to that tells you your creditworthiness. This number is called credit score, and it does indeed matter.
Your credit score can be a number ranging between 300 and 850. If your credit score is 300, then you’re in trouble. If it’s’ 850, then expect to be given more favorable rates from your lenders. So now that you’ve decided to buy a new car, the next step is to check your credit score.
To do that, you will need to go to the bank. But what if your credit score is bad? Well, that’s the tricky part. A credit score of 720 or above will present no issue at all. But a credit score between 300 and 600 might present an issue with most lenders.
If your credit score falls in this range, then here are a few things to do.
Pay Debt Owned
This is a very important factor that says plenty about your creditworthiness. If you have debt, it will reflect on your credit report. The more debt you pay off, the better your credit score.
Pay Bills On Time
Another important factor, the more you pay your bill on time, the happier the credit score. The system works in a way that people are encouraged to pay their bills on time. If they don’t, then that will reflect poorly on your credit score. So if you want to finance a car purchase, you should start showing signs of paying your bills on time.
The amount of available credit you have also dictates your credit score. You can’t possibly finance a new car purchase if you utilize 90% of your available credit. If your total credit is $10,000, then 10% availability means you have $1,000 available credit. If you’re using only 20 or 30% of your available credit, then that means you have a much bigger chance to get approved for a car loan.
Look At Offers
When looking at ways to finance a new car, a loan is right up there as the most convenient way. While you already know this, you shouldn’t go with the first lender that talks to you. Plenty of lenders will be eager to do business with you if you have the financial power to take out a loan.
Your chances of getting a good deal depend on one single factor – research. Research is absolutely necessary when looking at ways to finance a new car. By researching what terms and options different lenders provide, you can make a purchasing decision that reflects your spending power. Some lenders might offer you a better deal than others. When that’s the case, it would be unwise not to seize the opportunity.