You can save a lot of money on a car loan if you play your cards right. There are several things that you can do that many people tend to forget about that can reduce your monthly payments and save money on interest. Car loans are strict science and work by simple and easy to understand rules.
- Your Credit Score Matters
Car loans can have different interest rates depending on each lender and your credit score. If you have really bad credit, you can even get a 21% interest on a car loan. What you need to do is to improve your score. This will offer lenders a bit of reassurance and offer you a better interest rate on your loan.
- Down Payment Matters
Some lenders accept a 0% down payment. That does not mean you are getting a good deal. The interest rate on car loans increases as your down payment decreases. What you can do is save some extra cash for a month or two and come back with a 20% down payment. That should ensure you are getting the best deal.
- Pay Off The Loan Early
If you managed to find some good deals on car loans, you can further increase your advantage. Saving some extra cash and using it to pay off the debt early counts towards the principal. You will not pay interest on that money, enabling you to save even more money on your loan.
- Shop Around and Compare Car Loan Offers
You should never accept the financing option offered by the dealer. It may prove to be a good deal but you should always compare offers with other lenders. You may find other car loans more advantageous and could save you money in the process. In general, the financing offers dealers have are anything but advantageous. Also, they are less likely to negotiate the price on the car if you state your intention to finance it. Negotiate the price of the car first then explore alternative car loans and financing offers.