How to Get a Payment You Can Afford on Your Next Car Loan

May 19th, 2009 admin Posted in Auto Loans | No Comments » 133 views

Are you planning to purchase a new or used car, truck, SUV, van, or motorcycle? If so, you probably want to get a great vehicle with a payment that you can easily afford. Knowing the basics of automobile loans before you go shopping for a car loan can help you get a great car or other vehicle with a payment that will not strain your wallet. There are quite a few determinations to make to get the payment that fits your needs.

Two Types Of Car Loans

The first determination that you will need to make is whether you want to take out a secured or unsecured car loan. The secured loan will require you to pledge security against repayment of the loan – as in the deed to your home or other valuable property. This is called pledging collateral. The secured loan is the cheapest car loan you can get in terms of the interest that you will pay on the money that you borrow to buy your car, and usually a secured loan will have lower payments that are stretched out for a longer period of time.

The unsecured loan for buying a car is a loan that does not have any security backing it up, and therefore carries higher interest and must be paid back sooner – making your payments higher than the secured version. The secured car loan is always cheaper than the unsecured car loan, with less interest and easier to manage monthly payments.

Make A Down Payment To Lower Your Monthly Payment

If at all possible, you should make a down payment towards the purchase of your car. This not only makes the lender see you as the responsible borrower that you are, but it will also reduce the total amount that you owe on your car loan. Having a down payment will make your monthly payments lower, and will also reduce your interest rate. This can save you tons of money over the life of your car loan.

Additionally, if you want to trade your current car in when you buy your next car, your current car can be considered a down payment or be added on to the amount of down payment that you make. This can reduce the amount you owe even further.

Apply With A Cosigner

If you have a limited amount of credit history, or if your credit is not superb, you might consider applying with a cosigner when you take out your next car loan. A cosigner is simply someone who trusts that you will repay the loan, and if not, agrees to pay your payments for you. Having a cosigner reduces the risk the lender is taking when loaning you money, and thus makes your interest and thus the price of your car, less.

Online lenders offer lots of great options for buying your next car. Additionally, online lenders usually have loan payment calculators that can easily figure the amount of your payment before you take out your loan.

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