1. Debt-To-Income Ratio
First of all you need to do a debt-to-income ratio. Make a list of all of your bills and total them. Then subtract that amount from your income. What does it look like now? Do you have money left over? Or are you discovering that you are living paycheck to paycheck? When you apply for a loan most financial institutions will do a debt-to-income ratio as well as a credit check on you. That is the reason the loan application asks you to list all of your bills and your income. For Example, if your income total per month is $6,916.00 per month, you bills are $2,265.00 per month, then divide bill amount by the income and your debt-to-income ratio is 32.7%. Which is good. Most institutions would like it to be lower than 36%. Also, this does not include utilities, groceries, entertainment, or gas. Okay. Now you know that you qualify. Now to purchase that vehicle.
Below a debt to income ratio calculator.
2. Determine the type and cost of the vehicle.
Determine the type of vehicle you want and check the prices on it. You want to be a smart consumer. You can check on the internet to see. Determine what you want in your vehicle. Do you want a CD player? Do you want a 2-door or 4-door? Do you want a small size or Mid-size vehicle? Be sure to do your homework.
Also, keep in mind most new vehicles come with a nice rebate of anywhere from $1,000-3,000 or more. Determine before hand what you will want to do with the rebate money. You might want to save this for future car payments or insurance that will be coming due. If you have a vehicle already, determine are you trading it in or keeping it. Know the value of your present vehicle by looking on line at Kelly Blue Book listed below to determine the value.
3. Preapproval and Car Insurance.
Go to your bank or credit union and give them an idea of how much your vehicle will cost. They can process and preapprove the loan which is usually good for 30-60 days. When you find the vehicle just call back the information to the loan office with the details of your vehicle.
4. Insurance Company.
You can also call your insurance company and let them know the type of vehicle you are considering. They will be able to give you an idea about your insurance cost. When you find the vehicle call the insurance company with the information, which you will need to do anyway because the lender will need proof of insurance.
Finally, you do not have to accept the offer that the sales person has given you. You can negotiate for a lower price. You can also negotiate the interest rates. Some sales people are willing to give you a lower interest rate to get your business, especially if you have an excellent credit rating.
If you can’t afford a new vehicle you might want to consider a used vehicle. Also, consider making a plan to pay off most of your present debt.
Photo caption: fotosearch.com
Happy New Year