How to Save Money on a Car Loan

How to Save Money on a Car Loan Leave a comment

I am an economist and the founder and owner of Finance Blog Zone

save money on a car loan

Getting a car loan is a great way to spread the cost of owning your next car. There are a lot of options for you to save money on a car loan right now.

Car finance is affordable option for many but there are a number of ways in which you can help to reduce your monthly payments. Not to mention your interest rates offered. Two people could go into a car dealer an apply for finance on the same car but come out with completely different finance packages.

Let’s take a look at how you can get the cheapest car loan available. 

Increase Your Credit Score 

Having a better credit score when applying for a car loan can give you access to better rates. Lower interest rates mean that you don’t pay as much interest overall and can save you money on your car finance payments. Lenders tend to offer better rates to people with better credit because there are seen as less of a risk.

People with bad credit or who have missed, or late repayments are more likely to miss their car loan payments again. Before you apply for finance you could consider reducing the amount of debt you already have, making your payments on time, fixing any mistakes on your credit file, and keeping your credit usage low. 

new car

Choose a Longer Term

You can save money on your monthly payments by spreading the cost of your finance over a longer term. Choosing a longer term can lower your monthly payments. However, you should also take into consideration the interest rate offered. 

A higher interest rate over a longer term could mean that you end up paying more interest in the long run. If possible, you should choose a term and payment that is affordable for you. 

Check Your Chances of Being Approved

Making multiple applications for loans in a short space of time can have a negative impact on your credit score. A car finance checker allows you to check your chances of being approved and where you fall on the credit scale before you actually apply for finance.

It uses a soft search on your credit file which does not harm your score. You can then calculate your loan based on your credit rating and see what interest rate you could be offered. 

Save Up for Your Down Payment 

It may seem silly to save up for car finance when you want to spread the cost, but it can help you to save money. Having a down payment for car finance can help to reduce your monthly payments.

This is because you don’t have to borrow as much from the lender. It can also help you to get approved if you are struggling. It gives the lender more of an indication that you can be trusted to pay back your loan. 

Choose a Cheaper Car

If you really do want to save money on your monthly payments and suit your budget, you could opt for a cheaper car. Cars with lower purchase prices tend to have smaller engines, are petrol rather than diesel and manual over automatic cars.

Within a hire purchase agreement, the full cost of the car is split into monthly payments with added interest. Opting for a car with a lower purchase price can help to save you money in the long run.

Make Your Payments on Time

Meeting your repayment deadlines on any form of finance or credit can help to lower your monthly payments. It may not directly improve your current credit score, but it can help to lower your payments in the future by improving your credit score.

You can use your current car finance deal to show strong evidence that you can be trusted to pay back your loan or finance. 

Refinance Your Current Deal

If you already have a car loan, you could save money on your monthly payments by refinancing. It is recommended that you only refinance once you are halfway through your current agreement as there is less chance of having negative equity.

Refinancing is when you take out a new loan to replace your current loan and can reduce your term length and lower monthly payments. If your credit score has increased in this time, you could also receive a lower interest rate than you were first offered when you took out the agreement. 

Save Money on a Car Loan Today!

There you have it! You can choose to refinance, look at all of your options for loans, as well as find the best car for you with a car loan. Use this helpful guide to save money on a car loan today!

I am an economist and the founder and owner of Finance Blog Zone

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