Car loans with high rates of interest can cost you thousands of extra dollars than similar loans of low interest rates. Many people are of this opinion that there is nothing much to do to save money on the interest rates of your car loan as it is determined by the market, to some extent. But following some steps you may be able to shop wisely so that you can save money on the car loan. Read on to know about the 4 simple steps to avoid high interest car loans.
1. Check your credit: Before getting your auto loan, checking your credit report is the most important job. The higher your credit score, the more you can save on the interest rates of the car loan. To do this, get a copy of your credit report from the credit reporting agencies and check if there are any incorrect listings. You should aim for a score above 700 to get easily approved for a car loan and enjoy lower car loan interest rates.
2. Calculate your budget: Affordability is an important factor while you are taking a car loan. Check with your budget how much you can afford considering your income and household expenses and other family obligations. While calculating your budget, take into account the cost of insuring your car, fuel and maintenance costs. It is often advised that you should not spend more than 20% of your monthly income on your car.
3. Save money for down payment: The more money you can give as down payment, the more you will save on the interest rates. This may sound easy, but very few people are able to do this because it is tough to make a large amount as down payment. So start saving so that you can at least make 20% of the loan as down payment and save extra money on high interest rates.
4. Shop for quotes: Make a comprehensive market research for various car loan rates. With more options, you can make a better choice. The interest rates vary with lenders. So compare the rates to save on the interest payments on your car loan.
Above all, you need to be sure that you are in a secured position to obtain a financing with a reasonable car loan. Take your time and don’t hurry. Consider the above mentioned points before deciding on taking a cheap car loan.