Credit Score

5 facts you need to know before signing a car loan

If there’s one thing I wish I could go back and do again, it’s buying my first car. I thought I knew everything at 18, but no. As a first-generation Latina, I helped mi papá y mi mamá with all things financial. You know, like calling the satellite company at 10 years old because the canal de las novelas wasn’t in our plan. Buying my first car was no different.

I mean, my dad knew what to look for in a car. “Mija, que no tenga muchas millas. Asegúrate que tenga buenas llantas. This was extremely helpful because I knew nada de eso. I also didn’t know much about financing, the most important thing I needed to know when signing my first car loan. I thought it was supposed to be easy. I sign and take my new car, don’t I?

It doesn’t quite work that way… A few years and a new car later, here are five things I learned when signing my first car loan.

Your credit score is important!

Ya sé, ya sé, you’ve heard this often, but your credit score is essential, especially when it comes to making major purchases like a car. Be sure to check your credit score before you start looking for a new car. A good credit rating will allow you to obtain a reasonable interest rate on your car loan, para que no pagues mucho en intereses!

Sabias that the majority of credit card companies offer free credit monitoring services? If you don’t already use this service or don’t know if it’s available, call your credit card provider so they can connect you!

Algo important when it comes to your credit score is that every time you apply for credit, like a new loan or a new credit card, it affects your credit score. Free credit monitoring services will help you know how many times your credit has been checked – that’s another reason to take advantage!

You have loan options.

When I bought my first car, I thought the only place you could get a car loan was the car dealership. Pero learned from mis errors! You can visit different banks and credit unions with dealerships so you can get pre-approved on your car loan. Nine times out of 10, banks or credit unions will give you a much better interest rate.

I strongly suggest that you first check with the bank where you have your primary checking or savings account. You already have a history with them, so they can put together all your information for an approximate value of the car you can afford, as well as a modest interest rate for your new car.

Thus, when you go to the car dealership you say that you are pre-approved before you sell your loan services!

When you don’t have enough credit.

If you’ve checked your credit score and were concerned about a high interest rate, you have the option of having a co-signer for your car loan. Is lo that hice yo. My credit score wasn’t that good but needed a car, so my sister co-signed my car loan. She had excellent credit, so I wouldn’t have a high interest rate.

A co-signer is Alguien who shares responsibility for the car loan — they are listed on all loan documents. It’s important to be aware that they basically own the car as much as you do, so if you need a co-signer, make sure it’s someone you trust!

Advance payment.

I saved for about two years so I had enough diners to pay at least a 10% down payment on my first car. Mi papá is the one who told me to do this, so kudos to me for listening when I thought I knew everything! I’m so glad he did because if I hadn’t rated it I would have paid way more for my new used car.

A down payment is important because the more you pay up front, the lower your principal will be — the principal is the amount you borrow to buy the car. So, the less you borrow, the less interest you will pay! A good rule of thumb is to put in at least 10% if you’re buying a used car and 20% for a new car.

You can start all over again.

Alright, you’ve realized your credit score isn’t that good, you don’t have a co-signer, and you don’t have enough to put 10% aside, but you’re still buying the car at an interest rate. higher interest than you expected. No worries, there is a solution: you can refinance your car loan!

Pump the brakes.

Before you refinance your car loan, make sure it makes sense. Some of the most common reasons for refinancing your car loan are: your credit score has gone up so you can get a better interest rate, interest rates have gone down, or you want to change the term of your loan.

If you decide to refinance your car loan, I suggest waiting at least six months to give your credit history time to adjust. Adjust from what? Well, when you first bought your car, they checked your credit, so your credit score took a hit. Dale tiempo pa that recovers!

The excitement of a new car can sometimes make you forget the adult part of this one, trust me it did it for me and I paid the price for it. Literally. So I hope you learned from my mistakes!

Go ahead, enjoy your new vehicle now!

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