Q: What goes into calculating an auto loan?
A: Obviously the cost of the vehicle goes into calculating a loan, but there are a few more things you need to worry about, such as the length of a loan and the interest rate. The down payment you put towards the cost, your credit score, and whether the vehicle is new or used can be factors, too.
Q: Do I need a good credit score?
A: There are a variety of options for customers to finance a car regardless of their credit score, but you are more likely to get a better interest rate if you have better credit.
Q: What goes into your credit score?
A: Your credit score is just a three-digit number that allows financial institutions to determine how risky of an investment you are at a glance. Credit history, the number of credit accounts you currently have open, how well you make payments on time, how long you’ve have credit accounts, and several other factors go into determining your score.
Q: How much of a loan can I afford?
A: Experts say that a good rule of thumb for determining if you can afford a loan is to calculate 20% of your monthly income. If your loan would cost more than that per month, odds are you’ll be straining your wallet unless you’re a master budgeter.
Q: What are my options for financing a loan?
A: Most dealerships have a financial department that allows you to finance directly through the dealer, though you also have the choice to shop around at other banks and credit unions. If you have good enough credit, you can sometimes get pre-approved for a ballpark amount.