If you’re in the market for a new car and trying to figure out the best way to pay for it, you might wonder if an auto loan is right for you. An auto loan can be quite advantageous if you’re looking to minimize your monthly payments, but it doesn’t come without drawbacks. If you have no idea of how to refinance a car, read on for our guide on fitting an auto loan into your finances and how the benefits of financing compare with buying outright or leasing.
It can seem like a great idea to get a car loan at zero percent interest, but keep in mind that these rates are only available for a limited time. If you end up keeping your vehicle past its promotional period, you’ll have accrued thousands of dollars in interest that you could have avoided if you had financed at a higher rate from day one.
It’s important to understand that just because you are pre-approved for an auto loan, it does not mean you will get approval for one. Pre-approval means a lender has checked your credit and income and decided that you appear likely to be able to pay back a loan of a given size. Lenders may require multiple pre-approvals from different sources before they approve you for an actual loan, but do not assume that getting pre-approved means you will get approved.
One of the first decisions you’ll have to make when purchasing a car is which type of loan will work best for you. You back a personal loan that you can only use for personal purposes (such as a vehicle purchase). You won’t be able to borrow more than what you can afford, but interest rates are usually lower than those offered with an unsecured loan.
All cars come with a financing method, even if you don’t realize it. The vast majority of vehicles are leased and financed, and many consumers think they’re buying a car when in reality, they are only buying a set number of miles. Leasing may not be right for everyone, but understanding how auto lending works will help you make informed decisions. We break down some myths and explain how car leasing works.
Often, you’ll see a capitalized cost or MSRP number on car advertisements—but what does that mean? This can seem like financial-industry jargon, but understanding it helps you understand how much you’re paying for a vehicle. Car sellers may try to throw around these numbers to make their cars look cheaper than they are. So make sure you know what these figures mean before buying an automobile.
According to Lantern by SoFi, “Lending institutions will require the original loan paperwork to process a new loan.” So if you’re not sure where it is, contact your previous lender and ask for a copy of all documents related to your vehicle loan.