What Things Will Affect Your Car Loan

When it comes time to buy your next car, you'll surely have a lot of questions. Your first thoughts might be what type of car suits you best. You'll probably be concerned about a potential new car's mileage and condition. But another factor in making your purchase is thinking about what type of loan you'll obtain. It's vital to know how much you'll be paying each month for this new vehicle. To understand your monthly payment, here a few key elements of car loans and how they affect your payments.

 

Your Credit Score 

Your credit score and credit history are integral in the big purchases you make in life. Cars are no different. When it comes time to finance, a loan specialist will pull your credit and assess your score. The better your score is, the more favorable your rate will be. A higher rate equals higher monthly payments and more cost to you over the life of the loan. Conversely, if you have good credit, you can count on paying less each month.

 

The Loan Term 

You credit will also affect the term assigned to your loan. You may also have a say in this. Most car loans have terms between 48 and 60 months. The longer your term is, the lower your monthly payments will be; however, longer terms mean you will pay more over the life of the loan. You may also get a lower rate with shorter terms.

 

The Down Payment 

It's possible to find car loans that don't require anything down. On the surface, this may seem like a good deal. After all, you can use that money for other things--maybe even your first few payments. However, the more you're able to put down, the less your payments and principal will be.

 

Understanding your loan will help you make the right purchase choices. This will also help you better manage your payments.