Car loan payments are a long term responsibility with lasting effects on your credit, monthly budget and ownership of your vehicle. Throughout the term of your car loan, staying on top of those regular payments will ensure you keep your car and continue to build a healthy credit history. These tips will help you keep up with monthly loan payments.
Get the Right Loan
The right car loan for you is going to be easier to keep up with compared to other loans that aren’t as good as a fit. Before signing the loan agreement, or even setting foot in the car dealership, research auto financing offers that are available. Check your credit score and income levels to know the kinds of interest rates, terms and loan offers for which you are likely to qualify. Once you have an idea of the loan terms you can expect, you can narrow down the budget for the car you want to buy to a range manageable within your realistic monthly budget. Research and planning prior to falling in love with a car can save you from committing to a loan you may not be able to afford.
Expense Priorities
Car loan payments need to be ahead of less important expenses when you consider your budget month to month. One of the best ways to stay on top of your car loan payments is to think of the monthly expense as a high priority, on the same level as rent, mortgage or utility bills. For example, if money is tight and you can afford either the cable or the loan payment, you should go without cable television and stay current on the car financing. Another strategy for proper expense prioritizing is to avoid making day-to-day purchases with a credit card. The use of cash for smaller purchases will give you a tangible picture of where your money is going, and where you can cut back to make more room in the budget for car payments.
Know the Consequences
Make yourself aware of the consequences associated with falling behind on car payments. While reviewing the loan terms prior to signing, pay close attention to the section on late payment fees, payment related penalties, and the qualifications for both default and repossession. Knowledge of what could happen, to both your ownership of the car and your finances, should you stop making the required loan payments will help keep you motivated to stay on top of the loan until it is fully repaid.
Also, ask for information on any prepayment restrictions and penalties. If your loan allows for early or extra payments that will put you ahead of the payment schedule, taking advantage of that allowance will make the loan shorter and more manageable.
A defaulted car loan hurts your credit and usually results in losing your car. The best way to stay on top of your monthly car loan payments is to stay realistic with your household budget, so it can accommodate those important car payments.
