The interest rate is a significant factor of any type of loan. This establishes the amount you have to pay back versus the amount you want to borrow. Lower interest rates mean lower monthly payments. So your goal when looking for cheap car loans is to find the right lender that offers the lowest interest rate possible which your budget can afford.
How much do cheap car loans really cost?
An advertised car loan offering the lowest interest rate doesn’t automatically mean that these are cheap loans. The advertised interest rate doesn’t sum up the total monthly repayments of the loan. It is also best to note that cheap interest rates are available only to those who have good to excellent credit records.
So what should you really look at to consider a loan cheap?
5 Considerations to Conclude a Car Loan as Affordable
1. Loan Rates
Find the lowest interest rate possible in the market. It is a good idea to compare interest rates across several lenders. You can accomplish this by using a comparison website which is accessible across the internet.
2. Loan Terms
The shorter the better. A longer term for the loan means a higher total cost of payments in interest rates. So it is always a good idea to opt for a shorter term for the loan.
3. Loan Amount
The lower the better. A higher loan amount means higher monthly repayments and higher cost of interest payments too.
4. Fees and Charges
Cheap car loans include a few fees, however, this differs depending on the lender of your choice. Fees may include origination fees (cost to set up your loan), monthly ongoing fees, early payment fees, additional repayment fees, and late payment fees. Compare and determine whether this car loan is advantageous for you.
5. Check your affordability
Use a car loan repayment calculator to compute your estimated monthly repayment. To know if you are able to afford this, compare it to your monthly income after all mandatory expenses. Is there enough to cover repayments? Is there something enough for other emergency expenditures within your household? Is there enough for savings? You know you are able to afford a car loan if your income can cover the loan, mandatory expenses, and there’s still enough to allow you to live comfortably.
So If you are in the market looking for cheap car loans, look for the lowest interest rate possible. Use a car loan repayment calculator to make necessary computations on how much you are going to pay on monthly repayments. Then you decide if your budget can afford it. It is always good to compare figures across several lenders.
For instance:
XYZ lender offers $150,000 loan for 3 years with an interest rate of 5% per annum is $4169.88.
ABC lender offers $150,000 loan for 3 years with an interest rate of 7% per annum is $4171.16.
Note that XYZ lender shows a lower repayment because they offer a lower interest rate. However, this may not be the end of the computation yet because you will want to consider fees and other charges.
Choosing the Cheapest Loan Suited for You
The key to getting a cheap car loan is definitely in getting an affordable car loan that meets your needs. While a remarkably low-interest rate appears excellent, if it is tied to a very short term you can expect to pay higher payments. In the same manner, the low-interest rate with longer terms will tie you to pay a higher total interest payment. So depending on your affordability, choose an affordable car loan that meets your real financial position. Talk to a trusted loan consultant to help match you to an affordable and cheap car loan.
