Car Loans and Your Options

By Elaine McKeagan

There are a huge variety of car loans available. This gives you the chance to find the car loan that is right for you. But to be able to do this, you have to be clear on what you are looking for. You do not need to be a finance expert to get the best loan options. But you do have to know what you need and how to get it. Research is the key.

First of all, do you really know your financial situation? You may think you are okay and are paying off your debts in time. But when you apply for a car loan, the finance company will do a detailed study of your credit report and look for things like long terms debts that are not coming down, are you continuously using your maximum credit limit and whether your credit cards bills are paid on time. Get a copy of your latest credit score and see if there are any weak or gray areas. If so, fix them before you apply for a car loan.

Once your credit rating is in order, you need to plan your budget. How much can you afford to pay every month towards the installments? Many people first decide on the car they want and then see if they can afford it. Never make this mistake - you may be tempted to buy your dream car and overstretch your finances into committing to monthly payments you cannot realistically afford. Have a budget you know you can manage comfortably and stick to it. Remember that it is not just the car loan payments you have to consider. There are other costs to consider like the down payment amount, registration, insurance, gas and maintenance.

While your total outflow depends on your financial circumstances, a good rule of the thumb to follow is that your total payments should not exceed 20% of your monthly income.

Once you have your budget in place start your research. The internet is a great place to learn about interest rates, car loan durations, monthly payments options, discounts and a lot more. List out all the options that appeal to you and then try and find car loan packages that contain the maximum number of features you want. Short list 2 or 3 and start talking to the companies. Do not be afraid to negotiate. Once you have located the option that best suits you, you can start visiting the car dealerships.

Keeping your budget in mind, look at the car models available, based on your usage and needs - city driving, long distance, off road, large family space etc. Besides the immediate cost, look at things like fuel consumption, extended warranty costs, and depreciation and expected resale value. Once you have made your choice, sit with the dealer and talk about the financing - he will have many different car loan plans to offer you. See if he has a plan that matches or exceeds what you have already found. If yes, go with that. If not, tell him about what you have found and if he can match it. If he can't, arrange the car loan from the source you have located. It is easier to get the car loan through the dealer because he will be able to help you with the procedures and documentation, since he has already established relationships with the lenders and knows exactly what they want.