Calculate Monthly Car Payments - Can You Afford to Buy a Car?
The process to calculate monthly car payments ought to be your first step in the buying process. Otherwise, how will you know how much car you can realistically afford. So, before you buy a car you should create a realistic car budget and take all costs into consideration. You will have to consider paying for insurance, maintenance, oil changes, unexpected costs, and possible car payments unless you can pay the car off in full. This article will provide you with a number of helpful tips to consider.
Calculate Monthly Car Payments - Tip #1: Importance of BudgetingWhen you start looking for a vehicle to purchase you should already have an idea of how you will pay for it. Do you have a limit of how much you can spend on a vehicle if you want to pay it off in full? Or, are you considering purchasing a vehicle with a car loan? If so, you should have a good idea of how much you can afford as you calculate monthly car payments. Also consider how long you want to be paying on your vehicle to avoid paying too much in interest. This is why preparing a budget as you calculate monthly car payments is so important. You want to make sure that you are well prepared in making one of the most costly financial decisions.
Calculate Monthly Car Payments - Tip #2: Financing Your PurchaseLet's say that you are considering a car loan, you should try to put at least 20 percent down on the car. If you cannot put 20 percent down, then you may want to think about a more reasonable vehicle to stay within your budget. It is a good rule of thumb to put 20 percent down because this amount will help keep you from owing more on your loan than the car is worth as it depreciates. A favorable loan period for used cars is about 48 months / payments. Subtract your down payment from the price of the car and divide the remaining amount by 48 months / payments. The answer, plus the amount of loan interest you will have to pay each month, will be your total monthly car payment.
Can you afford your monthly car payments along with insurance, gas, maintenance, and other costs? If you can, then you are in a good place to consider a loan. Estimating car payments can also be done using online tools.
Calculate Monthly Car Payments - Tip #3: Know Your Credit ScoreBe sure to check your credit score and history. Know your score before applying for a car loan. You want a score of over 700. Most lenders wouldn't consider a score under 550. If you have a poor credit history with bad marks on your record, you should take 6-months to try to work on it. Some tips for boosting your score would be to get a gas or retail card and shop with it each month and pay it off in full each month. Although waiting 6-months before you buy a car may be frustrating ? just be patient and remember that it will be worth it in the long run.
Avoid re-submitting for a loan over and over again if you are rejected as this will hurt your credit score further. Again, try to be patient and research ways to better your credit score. If your credit is keeping you from getting a loan, you can consider asking someone to be a co-signer. However, you want to make sure that you are not going to struggle making your monthly car payments because now you will be responsible for someone else's credit as well. It's best to ask someone you are close to be a co-signer because this is a serious agreement. Your actions could seriously affect their credit record ? not just your own. That is why estimating car payments has to be a process you consider carefully using realistic numbers!
Calculate Monthly Car Payments - Tip #4: Lending CriteriaGenerally, lenders will approve you for a car loan if you meet the following criteria:
- Income of $1,600 or more
- Worked at the same job for at least six months
- Lived at the same address for at least six months
- A credit score of 680 or higher with a year of established credit history
- With a credit score of 600 to 680 you will have to pay higher interest rates