by Charlotte Wood
(last updated February 21, 2009)
It's always fun to get a new car, whether that be actually new or used, it's still new to you. The problem with buying any kind of decent car is that you usually can't pay for it all upfront. Most people don't have hard up cash to pay for a $15,000 car, so they resort to financing the car. Financing your car is fine, but you need to make sure you know what you're doing and that you don't get roped into any tight agreements you didn't know about.
One of the objectives of car dealerships is to convince you to finance your car through the dealership. That's not such a hot idea! Of course it's always best if you don't have to take out a loan to buy your car, but if you do most definitely avoid going through the dealership. Check out your options through other banks and credit unions. Car dealerships will only rip you off and make it so you pay way more money than you'd have to elsewhere. They'll say it's more convenient and that's it better for you, but chances are it's not.
Before getting any kind of car loan, you need to do credit preparations. Make sure you know what your credit score is. If you need to improve it to get a better loan, then do it. There are various ways to build your credit and if your credit is significantly bad then you shouldn't be considering taking out another loan anyway.
If you're young and wanting to finance your car, there's a good chance you may not even have a credit rating. If that's the case, then you'll probably end up with a higher interest rate unless you can find a way around that. One of the loop holes is to find someone to co-sign with you. This person should have a good credit score and you need to make sure you can hold up your end of the deal because if not then you'll end up dragging your cosigner down and their credit score will also suffer. When taking on a co-signer, do so with confidence that you can pull your share of the weight!
Another way to establish good credit before taking out a car loan is to apply for a low interest rate, basic credit card. If you can make regular payments and show you can handle making payments, then your credit score will go up ensuring a better interest rate for that eventual car loan.
Financing a car can be tricky business so make sure you go in with the best chances of securing a good deal. If you're in control of your credit then you can be in control of your financing and all will be well!
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