Buying a new car can be a daunting experience, especially when it comes to financing. The good news is, with a little bit of research and preparation, you can land yourself a great auto loan deal. In this blog post, we will take you through some important steps that newbies should follow when considering auto loans.
1. Check Your Credit Score
Before shopping for a car loan, you must check your credit score. Your credit score is the most important factor that lenders consider when deciding if you are eligible for a loan. A higher credit score generally means better interest rates and terms. You can get a free credit report from one of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year. Check your report carefully and make sure there are no errors. If you find any errors, dispute them with the bureau.
2. Determine Your Budget
Once you’ve checked your credit score, you need to determine your budget. What can you realistically afford in monthly payments? How much can you put down as a down payment? Don’t forget to factor in other expenses such as insurance, gas, and maintenance. Use an online auto loan calculator to help you figure out the monthly payments and total cost of the loan.
3. Shop Around for Auto Loans
Don’t just accept the first loan offer you receive. Shop around for the best deal. Look at different lenders such as banks, credit unions, and online lenders. Compare interest rates, loan terms, and fees. Make sure to ask about any prepayment penalties or additional fees.
4. Understand Loan Terms
When you are comparing different loan offers, make sure you understand the terms. How many months will your loan be? What is the interest rate? What will your monthly payment be? What is the down payment requirement? Make sure you understand everything before signing on the dotted line.
5. Get Pre-Approved for a Loan
Getting pre-approved for a loan gives you an idea of how much loan you can afford, which will help you when you are shopping for a car. It also shows the seller that you are a serious buyer. It’s important to note that pre-approval doesn’t guarantee a loan. The lender will still consider the car’s value, your income, and credit score. Once you’ve found the car you want to buy, the lender will complete a final approval and process the loan.
By following these steps, you can sail through your auto loan process with ease. Good luck!
There are many free apps that allow you to do this without affecting your credit score.
- Credit Karma
- CreditWise by CapitalOne
- Some credit cards included a credit monitoring app. Like Self
- Experian
- Equifax
- TransUnion
Your objective here is to get an idea of your credit score and credit worthiness from an auto dealerships perspective. If you think you’ve got the chance, and even if you don’t, I suggest seeing what you qualify for using Carvana or CarMax.
I prefer CarMax personally. I’ve purchased many vehicles through CarMax. I especially like that when they do decide to run your credit for an auto financing decision – they run it one time for up to 8-10 auto loan lenders, including their own in-house financing option, which can make obtaining a loan a little bit easier.
Living Life in My Car 