So You Need to buy a Car?
How do you know a car loan is right for you? This is something only you can answer. Before you answer that, here are a few things that are necessary to know.
- What is an auto loan?
An auto loan allows you to purchase a new or new used vehicle. You borrow the money and pay back the lender over a period of time, usually with interest. Interest is the APR (Annual Percentage Rate) on the loan you take out. Some interests rates can be 1.99% and others can be 5.95%, they vary. It usually depends on three important things: your credit, your monthly income and your down payment.
- Do you need a cosigner?
If you have bad credit, no credit, low monthly income or are under the age of 21, you will probably need a cosigner. A cosigner is someone who makes a legal obligation to pay your debt in the event that you cannot maintain the commitment. As long as payments are made on time, this will help build not only your credit but your cosigner’s as well. The ideal cosigner is usually, mom, dad, aunt, grandma or a guardian with a solid credit history.
- How much cash do you have for your down payment?
You may want to save up a good amount of cash before signing up for a loan. Determining what to put down will affect how big or how little your monthly payments will be.
- Does your monthly income support the loan and possible interest rates?
Determine your budget and current monetary commitments. Can you handle a bill this size? Do you already have bills like a cell phone bill, student loans and rent, etc.? When thinking of getting a car loan, consider other monetary expenses like: car insurance (Michigan is a "no fault" car insurance state so the rates are very high), car maintenance and unexpected expenses such as a flat tire.
- This will build your credit!
Having an auto loan is a great way to show that you are capable and responsible to make monthly payments on time and consistently. Your payment history will most likely be reported to the three credit bureaus, Equifax, Experian and TransUnion. The Bureaus will keep track of your credit history and make it available to lenders. Having good credit is important for things like buying a house, renting an apartment, or getting a credit card for emergencies or travel.
Committing to a car loan is a huge responsibility. It can be a great journey; it can build your credit score and give you the freedom to have your own dependable transportation. Remember to take your time and read carefully. If you want to know more about car loans check out this website below!