Any time you need to ask for a loan can be nerve-wracking, and looking for a car loan is no different. Rest assured that it is an incredibly common practice, and as long as you do your due diligence you should have no problem finding a loan that helps get you into a new vehicle. However, the type of loan you receive can vary wildly, and you won’t just be handed the best possible rate without working for it. Yet shopping around and refusing to settle for anything but the best can end up paying dividends in the form of better term lengths and lower interest payments. A number of factors play into the specifics of the loan, and dealing with all of these elements can be a bit of a hassle. But put in the work and you’ll find a reputable service provider and an affordable car loan.
First off, make sure you get started preparing your financials well in advance of the application process. If you want an affordable car loan you must make sure you are an attractive candidate, and that starts with your credit score. So three-to-six months before you mean to get that car loan, request your credit report from the three major reporting agencies. You are allowed to request a free copy of your report once per year, but you will have to pay a small fee for copies from the other two agencies. Look them over top to bottom for any red flags. If there are records of missed payments that are inaccurate you should dispute them and have them struck from your record. You should also look over the credit score you are given by the various reports, so you have some idea what you are in for. The better your credit rating, the better the rates you should receive on the loan.
Next, start shopping around for the vehicle. It’s best to know how large a loan you are looking for before you make the request, and that always comes down to the car you have in mind. Come up with a couple of vehicle options you can deal with at a couple of different price points, so you won’t be completely disappointed if you aren’t approved for the largest of the loans. Also keep in mind that you will have to balance the expenses of new versus used to decide what fits your budget the best. A used vehicle will be less expensive, but a new vehicle will always be financed at a lower interest rate.
Now you’re ready to get some actual loan numbers. But never stop after just one option. You’ve got to get several loans from several different lenders on the table. You are allowed to shop around, and should expect to if you want to land on the most affordable option. Find yourself an online loan calculator that can devise average loan rates from a number of financial institutions. The best calculators can include your zip code to adjust for various regions, and will also offer averages based on different credit ratings. With these figures in hand you should be able to determine which companies you should approach first.
Once you have a couple of loan packages presented to you, step away from the bargaining table and take a long look at the numbers. You’ll obviously want to choose a loan with a lower annual interest rate, as you will pay less over the whole term of the loan. But there are other factors to look at as well. You’ll want a loan package that includes a competitive offer for your used vehicle trade-in, as well as a term length you can live with and an affordable down payment. It all comes together to give you the total cost of the loan. Make sure you can handle every aspect of this auto loan before you sign off on it, as you never want to be stuck cashing your paycheck at one of those dollars direct outlets just to make a monthly payment. Shortcuts like that will cost you more overall, and even the best car loan on the market will damage your financial picture if you bite off more than you can chew and miss payments.