The Benefits 
Of Car Financing

How Does Used Car Financing Work?

If purchasing a car is on your to-do list and long-term goals, financing has probably crossed your mind. You might be considering buying a used car instead of a new one and getting the lowest rates possible from a credible lender. Best way to this is by choosing a right bank as banks easily lend money with flexible terms and payments. Normally, there are two financing ways to choose from:

• Bank Financing
• Dealer Financing

The most common way is to get financing from a banking institution. Vehicles are used as collaterals where these were purchased by buyers who were unable to continue with their payment schemes. Before making a final decision, check your finances well and make sure they are in order. Ideally, monthly used car payments should not go beyond 1/3 of your net monthly income.

Below are some points to remember:

1. Down Payment
2. Interest Rate
3. Payment Terms
4. Additional Charges and Fees

So, how does used car financing really work?

1. Check your credit score – credit scores are based on the information in your credit reports. Accuracy is of high importance. High credit scores help you get lower interest rates.

2. Choose best payment terms – don’t get deceived by marketing promos they offer to new and existing customers. These are usually bundled with higher monthly payments. It is best to figure out how much you are able and willing to spend each month on a car payment without the need to sacrifice your existing budget plans. The longer the terms, the longer the payments. However, when buying a used car, interest rates are high and can cost you more in the long run. In other words, you owe more than the vehicle is worth.

3. Choose the right vehicle for you – once you get pre-approved, then it is time to shop for your preferred car. Negotiate the best deals for the vehicle and make sure that it is not older than 5 years and mileage is less than 10,000 kilometers.Otherwise, condition of the car is weak and most likely, it would need a maintenance fix; meaning, spending another big chunk of money. Additionally, be reminded of car restrictions on used car loans. Do not also forget to test drive your car!

4. Finalizing documents – by this time, you have already chosen your car and negotiated the final price. There would be some paperwork to do, and lenders should be able to walk you through the process of finalizing the used car sale.

5. Payment starts now – information regarding payment schedules is sent to you by the lender. It may be done through mail (office or branch) or online accounts. Should you decide to prepay the loan without any charges, you have the option to do so by verifying it with your lender so you can pay off the loan in an instant. Make sure that additional payments are processed accurately and accordingly.

In reality, it is okay to spend money on things we want in order to achieve our goals. As a saying goes, “before you spend, earn; before you invest, investigate”.