One of the most important things to consider when you take out a car loan is if you can actually afford to pay it off when it’s all said and done. Some people approach credit and loans as if they’re free money but that is very much not the case and those people learn a hard lesson. Here’s our tips on how to make sure you can afford the loan you’re trying to get. 

Establish Your Budget

The first step comes before the loan itself, you need to sit down and figure out exactly what you can afford. You can’t always factor in how much the loan is going to cost because that could fluctuate on the day you buy it, but your own finances are concrete and you should figure them out. 

Go through the month and track all of your incoming and outgoing expenses. Everything from food to fuel should be noted down, once you take these two numbers it’s a simple matter of subtracting your expenses from your income, whatever’s left is what you can afford on a monthly basis. 

Shuffling

Writing it all down also helps with this step, if that number remaining is too low, or even 0 then you’re going to need to figure out how to make it big enough to afford car loan payments. By noting down every expense you can figure out exactly where you seem to be spending too much and can or should cut down. 

Switching to a cheaper food store for example could be a place to save. Or cancelling subscriptions to services you no longer use. With an estimated value of the car loan you can also get a rough estimate for how much the monthly payments will be, which should give you a goal for all of this shuffling. 

Refinance or Return

If you already have the loan and are struggling to make a repayment, even with the shuffling, you have 2 options. First you should try to refinance the loan, if you can renegotiate the loan to have lower monthly payments with a longer term, you’ll end up paying more in the long term, but in the short term you won’t end up defaulting which is the primary thing you want to avoid. 

If that fails then it seems that you can’t afford the car and will have to downsize, you can return the car and cancel the loan in exchange for a car you’re more likely to afford instead.