4 Factors to Consider When Applying for a Car Loan

June 28, 2022

Owning a car can make many things in your life easier. It allows you to travel from one place to another without worrying about unexpected delays, uncomfortable and long commutes, and more. 

However, it’s no secret that buying a vehicle can be expensive. If you’re looking to replace your current ride with a new one but don’t have enough cash to pay upfront, applying for auto financing programs might be the right choice for you.

A car loan allows you to pay the full price of your new car on an installment basis. However, like any other lending program, this also accrues interest over time. Before you sign an agreement with a lender, make sure you understand what you’re getting into. Consider the following factors first so you won’t end up spending more than you intend to.

Credit Score

The outcome of your loan application is heavily dependent on your credit history. It determines important factors such as interest rates, payment terms, and the total amount you can borrow. Having a low credit score might reduce your chances of getting approved, so you should look into your credit reports first.

Check your credit score a few months before you apply. You can research online or consult with a financial professional on how you can improve your score, like disputing inaccuracies or paying delinquent debts. When you have a good credit history, it will be easy for you to get the maximum loan amount and favorable rates from lenders.

Loan Tenure

Auto financing programs usually last from 12 to 92 months, depending on what you and a lender have agreed on. If you want to have lower monthly payments, you may opt for a longer term. However, this also means higher interest rates for your loan. As a result, you may need to pay more overall.

On the other hand, if you opt for a short-term loan, you’ll have higher monthly payments but lower interest. Assess your current financial situation and see what arrangement best fits your needs. Always choose the option that will help minimize borrowing rates and fees.


Potential Penalties

Every car financing program is different. Be sure to read the fine print before signing anything. If some of the terms and conditions of your lender are unclear to you, don’t hesitate to ask questions. This way, you’ll be aware of potential penalties, such as prepayment charges. Your lender might make you pay additional fees because they won’t earn as much when you settle your loan in advance.


The Lender You’ll Be Working With

A car is one of the bigger investments you will make. It’s essential that you choose reputable financial institutions like banks or credit unions. Let Firefighters Credit Union help you get behind the wheel with our auto loans in La Crosse, WI. Contact us today for details.

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