Are you planning to buy a new or used car? This is a significant purchase and you might need external financial backing to get what you need. You don’t have to pay the whole sum upfront, this what a car loan as for, but you do need to know all your options in order to make a responsible decision. Car prices have been slowly increasing with each passing year and for many shoppers, it’s becoming more difficult to save enough money on their own. If you don’t have enough money around, there’s no need to worry. Here are a few tips on how to get a car loan and pay in monthly installments without crippling your financial situation.

1. Understand Your Budget

Before making any financial decision you should know what you can afford to purchase. Before taking out a loan you need to know your budget and what your limits are. Start by researching both new and used cars and make a list of what you like and what you can actually afford.

Once you settled on a few cars, you should decide how much you can afford to pay out of your own pocket. The more you are able to pay, the smaller the loan you will need to apply for. You will need to make monthly payments so make sure your current budget is sustainable and that you have a steady job. You do not want monthly installments looming over you if the business you work for decides to close.

Understanding all the fees involved with the purchase of a car is also crucial. Sometimes there are many taxes and fees you don’t know about, so it’s easy to miscalculate your budget and then end up short.

2. Credit Score

Your eligibility for a loan and your interest rate depend on your credit score. All banks have certain credit score requirements before offering you a loan. If you have a bad score you might not even receive a car loan at all, or you will get one with a really high interest rate because the bank is taking a risk. So before anything else, know your credit score and what it means for you. Going in uninformed can have a significant financial impact on your life.

3. Compare Lenders

Don’t just settle with the bank you worked with for years, they might not offer the best terms and conditions for a car loan. It’s also advisable to not take a car loan from the dealership either. They work only with certain banks and add various fees to your contract so both of them benefit from you taking the loan. Look around and find the lender with the lowest interest rates. Nowadays research can easily be done online. There are many websites out there that can compare the interest rates of all the banks in your area. Shop around and decide whether a bank, a credit union or a private loan is the best option for you. Go with the best interest rates before closing the deal and make sure you can repay the loan without any unnecessary sacrifices.