It’s much more fun to shop for a new car than to shop for financing. That’s why many car buyers put off this important task until the last minute – but it should be one of the first. Getting the right auto loan can save you money, while getting the wrong one will cost you.
The sooner you start shopping for financing options, the better your chances are of finding an interest rate that works for both you and your budget.
Here’s a quick guide to help you snag the best deal on an auto loan.
Make Sure You Speak the Language of Lending.
Before you even think about getting a loan, it’s essential to understand the key points of auto financing. Interest rates, loan terms, principal, down payment, and monthly payments are just some of the terms you’ll want to familiarize yourself with before applying for an auto loan.
Keep Track of Your Credit Score and Know how It Affects Your Loan.
Your credit score represents your credit history and financial responsibility. It helps lenders decide whether or not to lend you money.
People with lower credit scores will generally have a harder time getting loans and can expect to pay higher interest rates.
It’s a good idea to carefully check your credit reports before car shopping. If your score is bad, you can work on improving it before you apply for financing. If you notice errors, you can get them fixed before they cause damage. It can take some time to repair and improve your credit, so it’s best to act before you buy a car. The worst time to discover you have bad credit or other credit issues is when you’re at the dealership trying to buy a car.
Shop Around and Find a Financing Deal that Works for You.
You should shop around for loans just like when buying a car. You can finance your vehicle through the financing arms of many carmakers, as well as large national banks, small community banks, credit unions, and finance companies.
Apply for A Car Loan the Smart Way.
You can negotiate a better price for the car by having a preapproved deal in your pocket. Apply for a car loan from several lenders, and pursue the deal that offers you the best terms. However, do so within a two-week period to avoid damaging your credit score.
When you fill out your loan applications, you must be completely honest about your finances and employment history. Failure to do so can lead to problems with your application or even the revocation of your loan.