Auto loans have never been a more attractive option than they are today. Interest rates are lower, the vehicles are safer, and even if you have a less-than-ideal credit score, you can still get an auto loan. However, lenders are not in the business of losing money when they can profit by offering consumers an expensive loan deal. This means that you need to do your homework when looking for a lender if you want to get a car loan for a steal. If you’re buying a car that requires financing, take these five steps to ensure you get the best auto loan for your budget.
Examine Your Credit Report
You should order a report from all three of the major credit reporting agencies—Experian, Equifax, and TransUnion—and you can do this online. This gives you time to correct any mistakes that might have appeared on your report. Checking your credit score is advisable before applying for a loan, as the interest rate you are offered can be affected by your score.
Ship Around
If you’re obtaining financing for a new car, shop around for the loan. Don’t just go to the dealer and hope for the best. When you make an effort to get a good deal on your loan, you can rest assured that everything’s taken care of. Credit unions and community banks tend to provide the most affordable car loans. If you go to a credit union or community bank rather than a car dealership, you’ll be able to negotiate better terms and get a lower interest rate.
Pick the Shortest Affordable Loan
By extending the term of car loans, automobile manufacturers encourage buyers to purchase more expensive cars. Car buyers should consider limiting their auto loans to no more than 48 months. This is because lengthy loans often have high-interest rates that can dramatically increase the loan payments and make them unaffordable.
Don’t Take the Car until Financing Is Finalized
When you buy a car, you may feel good about the deal and want to drive the car home, but be sure that all financing has been approved before taking it home. Otherwise, you could lose the negotiated price, your trade-in, and your deposit and end up paying for more expensive financing.
Don’t Just Consider the Monthly Payment
By looking at the total price of the vehicle, you can determine what a reasonable monthly payment is. When you focus on the monthly payment instead of the total price, you won’t know how much you’re really paying for the vehicle. You may pay more than is reasonable for the car, get less than you could for your trade-in, and maybe finance it for too long.
