Buying a car is not going to be cheap. Others think of this to be the second most expensive investment in their lives. It doesn’t matter if you choose to buy a brand new car or a used one, you will still have to shell a huge amount of money for it. However, not everyone can afford to pay for the car in cash. Car financing is one way to take care of it.
Understanding Car Financing
So how does car financing work? When you choose this option when buying used cars in phoenix, the bank or the financial institution lends you the money to pay for the vehicle. Then you will have to pay for this amount plus the interest, on an installment basis. Usually, you will have to make a downpayment which is a percentage of the loan amount. You will then have to repay the purchase price of the vehicle over a period of time depending on your loan term.
Applying for a Car Loan
Are you ready to get your car? Now that you know how auto-financing works, then it is time to learn what are the steps to take when you are ready to apply for a car loan. It is important that you are familiar with each step so that it will not come as a surprise for you when are already processing your auto financing.
- The Credit Score Requirement. In most cases, lenders will be needing to run a credit check on the lendee before they are approved of the loan. That is why before you apply for one, you have to make sure that you have a good credit score and history to have a better shot at getting approved.
- Get Pre-Approved. When you walk into a car dealership and you are already pre-approved for an auto loan from a bank or a lender, this gives you a guarantee to be approved of driving your dream car home. This gives you the leverage and the peace of mind that you have a loan that will cover the cost of the car that you really want to buy.
- Know The Costs Before Saying “Yes”. Before you sign the deal, you should have a good understanding of the costs. This does not only pertain to the total cost of the car, but also to the interest that comes with the loan, the loan payment, and also the loan term. Most car dealerships that assist in financing pre-approval have an auto-loan calculator that their customers can freely use. Using this will give you an idea of the numbers that you will have to deal with.
Car Financing and Credit Score
Do you need to have a good credit score to be approved for a car loan? In most cases, yes. The majority of the banks or lenders will require you to have a good credit score and clean credit history. But this isn’t always the case. There are car dealerships that will let their customers apply for a car loan even if they have a bad credit history.