Are you looking to buy a new or used car? Can’t afford the money up front? Then you will need to get a car loan; this is called car financing . Financing your car is like getting a mortgage for your house: you pay what you can up front and then make monthly payments.
When financing a car, you have a couple of options. You can go to the dealership, to a bank or credit union, to an online financial institution, or to a friend or family member. If you own a house, you might consider getting a home equity loan.
Often, in Sweden it is cheaper to get a loan from bank or online financial institution, such as https://finansis.se/billan/, than from a dealership because the salesperson is working on commission. However, if you get financing from a financial institution, you will need to arrange the details before you go shopping for a car: get pre-approved for the financing. Online banking can make pre-approval quick and easy.
When you decide how you want to finance your car, keep the advantages and disadvantages of each lender in mind. The danger of borrowing from a friend or family member is the risk to the relationship and the possibility of unprofessionalism. At a bank, online bank, or dealership, your transaction will be professional. Using home equity to finance your car can give you a break on taxes, but it is also sometimes a risky proposition because it ties your car to your home.
Your financing rate (your interest rate) is affected by numerous factors:
- your credit rating: a better rating is a better rate
- your geographic location
- the age of the car : the newer the car, the lower the rate (though some credit unions give equal rates based on the age of the car: ask your lender)
- the term : the shorter the loan, the less interest you pay. However, if you have a shorter term, you will also have higher monthly payments.
While these variables affect your rate if you are financed through a bank, if you choose dealership financing, the rates will more than likely also be affected by the dealer’s profit margin.