When shopping for a new vehicle, you may need to take out a car loan to cover the costs. While applying for a loan might seem stressful, especially if it’s your first time, it doesn’t have to be. The following information can help you secure the right financing to land a reliable ride. 

A Guide to Car Loans: What Consumers Need to Know

What should I do before applying?

Go into the loan process knowing your current credit score. The better your score, the more likely it is you’ll be approved and receive a good rate. You should also know how much you can comfortably spend. Even if you can get approved for more money than you need, stick to your budget. 

Where can I get a car loan?

If you currently belong to a financial institution, like a credit union, you can apply there. This is usually the best option for the lowest rate since you’ll already have an established relationship with the financial entity. You can also secure a loan through the dealership, but this often incurs higher fees and a less favorable interest rate. 

What is the annual percentage rate (APR)?

There’s a formula used for calculating the APR for a loan. Take any fees (if there are none, use zero in their place) associated with the loan and add them to interest paid during the term.

Take this figure and divide it by the loan amount, then take the new figure and divide it by the term of the loan, or the loan length. Take that number and multiply it by 365, then multiply that number by 100. 

How long should the term be?

Loan terms range from one year to 84 months. The longer the term, the more interest you’ll pay over the life of the loan, which makes it more expensive overall. However, a shorter term means higher monthly payments. Consider your budget carefully when deciding on a loan term. 

As a member of the Hawaii County Employees Federal Credit Union, you can rest assured of a stress-free loan process. This trusted financial institution has been serving residents in Hilo for more than eight decades, whether they need financing or are just looking for a safe place to save their money. When it comes to loans, they offer a wide range of products at competitive rates. Learn more by visiting them online or call (808) 935-2969 to speak with a representative.