Tips
for Financing or Refinancing Your Car Loan
By Sandra Wellman
Always get your financing first
before shopping for a car
When
buying a new car, if you have financing already in place, it’s
much easier to haggle over the price of the car if necessary. If
you are pre-approved, you know exactly how much you can spend and
the approximate monthly payment. Try to get approved for a little
more than you think you will spend, just in case.
The 0% financing trick – 0% or
cash back rebate?
Don’t
be fooled by 0% financing, unless your credit is almost perfect,
you won’t qualify. If you do, you may be required to pay the
loan off much sooner than you can afford (like 2-3 yrs instead of
5). Be sure you know the
amount of interest you will be paying over the term of the loan
with your pre-approved amount in advance, because you might pay
less total interest than the dealerships financing and want the
cash back rebate.
Have your paperwork and check ready
before you go
If
you get pre-approved online for a car for say $20,000.00, the company will
mail you a blank check and a letter to show the car dealership.
This could take a week or two. If they don’t offer to
send it overnight, it might be worth it for you to pay the $15-20
fee. The finance person at the dealership will call the loan
company after you’ve made your purchase and advise the amount of
the check. Bonus – you will have to sign less than half of the
usual paperwork!
Shop Online for financing
Whether
it’s for a first finance or refinance, the rates you can get
these days by shopping online are great. There seems to be more
competition and that’s good for you.
Consider having an automatic
deduction from your checking acct.
I
saved ½ a percent on my recent purchase by letting them set it up
as an automated deduction. They let me pick the exact day I wanted
it. On a side note, if you have a few bills paid this way as I do,
you might want to pick the same day for all. It’s easier to
remember to write it in your check register.
Try to spend within your means
I
know this seems obvious to some, but you need to plan on the
additional expenses. Call your car insurance company before
purchasing the vehicle, and ask for a few quotes for your new
insurance premium. You may be surprised that the new Honda you
were looking at is classified as a sports car. Better to know in
advance than after your purchase. Don’t forget, your
registration will be more too.
Refinancing your vehicle can help
your credit
If
you are having trouble paying your bills and have at least 2-3
years left on your car loan, this can be an excellent way to
reduce your monthly expenses. You’ll pay more in interest, but
it may be worth it to keep your bills paid on time and your credit
score up there. Be sure to refinance before your payments are too
late or you’ll have to pay higher interest. Also, I would do
this before I made payment arrangements with my creditors if
that’s also needed, because that will show up on your credit
report when they approve you for the refinance.
Bad credit financing
These
days more and more companies are willing to finance a vehicle even
if your credit is bad or you’ve had a bankruptcy. You’ll pay
higher interest, but again shop around and online. It will be
better to get at least an idea of what you’ll have to pay before
going to the dealership. You may get approved for 14-16% online
and 18-20% at the dealership. If you have time before purchasing a
vehicle and it isn’t an emergency, run your credit report online
and have it mailed to you. Verify all the data is correct. You may
have time to repair an item and get a better interest rate. See my
article on how to do this.
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