Save Money On Car Loans - Part 1

So you reached the stage where you've decided to change your car. But you never seem to have enough money, so you'll have to add to your existing debts. You don't really want to borrow any more because it's such a struggle to repay, but you really need a car.

And now for the good news; you can save money on car loans...provided you know what to do.

1) Save Money On Car Loans

Most private cars are bought with borrowed money, either in the form of a personal loan or a special car finance scheme offered by a variety of dealers/lenders. Here's how to get the best finance deal for your new vehicle.

a) Shop around for the best interest rate

Lenders are always competing for your business. It's a buyer's market, so don't accept anything more than the going rate for someone of your financial status.

Use the internet to search for the lowest rate available. And bear in mind that lenders are constantly trying to attract new customers with special deals.

Doing your homework and comparing a range of different deals (always using the APR rate and the overall cost over the life of the loan) will allow you to get the best deal.

One advantage of using a personal loan rather than a car finance plan is that your loan and the rate of interest you'll pay can be pre-approved before you go shopping. This means that you know how much the loan will cost you before you go shopping, and you won't have to haggle with the car salesperson. The also removes the risk of them being able to confuse you into paying more for your car than you intended.

b) Improve Your Credit Rating

Having a good credit rating is one of the most important ways to save money on car loans (or any loan for that matter). The better your credit rating, the better deals you'll be offered on your borrowing.

A good credit score = A low interest rate

Again, take a look through the internet. There's a wide range of information on how to build up your credit score.

For now, just remember than it's important to pay all your loans on time (late payments of defaults will damage your credit score). It's also important to keep your overall borrowing within reasonable limits. After all, from the lenders point of view, someone with heavy debts represents more of a risk.

c) Gather together as big a deposit as possible

The more money you have to put towards your new car the less you'll have to borrow.

So in the months prior to changing your car, save as much money as you can to reduce the amount that you have to borrow. Every extra dollar you can put towards the deal may save you repaying two dollars.

It's also important to take your current car into account. The more you can sell it for (or trade it in for), the less you'll have to borrow to fund your new car. So with that in mind, here's how to get the best trade in value.

- Take care of your car. Drive it carefully, and keep it well maintained and serviced.

- Before you visit the car showroom, do your research. Find out how much your car is worth. Find out it's trade value and the amount that a garage could sell it for. There figures will give you a rough idea how much the dealer should offer you for your old car.

- Find out how much the dealer is willing to give you for it's trade in value. And if a car dealer offers you a laughable sum for your old car just move on to the next dealership.

Whatever happens, don't haggle hard to get the best deal on your finance and then hand it back to the dealer by accepting a poor trade in value. It's an unwritten rule of the car trade; the less the dealer makes on the sale of a car/the finance agreement, the less trade in value they'll offer.

Click here for the second part of Save Money On Car Loans - Part 2

  Del.icio.us      Digg      Newsvine      Reddit