Ask these 3 Questions
Am I absolutely sure I can make every monthly payment?
There’s only one way to know for certain: by doing the math. Since this is your first car loan, you have an opportunity to get started the right way: with a written budget. Don’t worry — creating one is easier than you might think. Here’s how. First, figure out your monthly income. If you’re not sure, take the net amount from your last W-2 and divide by 12. That’s how much money you take home every month. Then use a calculator to add up all of your monthly expenses, including rent, utilities, groceries, and so on. Subtract your total expenses from your monthly income. Your car loan payment has to be able to fit into the amount left over. If it doesn’t, you won’t be able to make the payments — but that’s OK, it just means you need to look for a smaller loan.
Have I saved up a down payment?
When you’re first starting out, you might not have much of a credit history. And without credit, it can be much more difficult to get a good deal on financing a car. One of the best tactics to help you is to save up a down payment on your car. With a large down payment, you have a better chance of getting a loan, even if you’re a first time buyer. Because when lenders see the amount of your down payment, they know that you have a bigger stake in paying off your loan. Your best shot is to search for car loans online. There are quite a few good financial portals in Sweden, like Billan24.se, where you can compare several different loans with different rates.
Saving up a down payment isn’t as hard as you think. Here’s how to do it.
First, figure out how much of a monthly payment you can afford to make on your car loan. If you’ve already created a written budget, then you already know. Then, all you have to do it start setting aside that amount every month in a savings account. Most banks have free savings accounts available, so opening an account won’t cost you a dime. And you can usually do it online.
Every month, make that payment to your savings account — the same way you’d make a payment on your car loan. When the balance is finally big enough, withdraw it and use it as a down payment on your car. How big of a down payment is big enough? Try for at least 10% of the purchase price for a used car, or 20% for a new car.