Getting the best car loan can be tough, especially when there are so many options out there—we’re talking about interest rates, term lengths, and all those other things you have to think about! Don’t stress! You can find the right car loan option by following these 7 smart tips to get the best car loan.
1) Shop Around Before Buying Car Loan
Getting a loan for your car is easy. In fact, there are many different financing options available from different banks and dealerships; at times it can be difficult to compare them all in an apples-to-apples manner. However, there are some general guidelines that apply across the board: The first is to shop around – seriously consider multiple offers and go with whatever makes sense for you personally. What’s best for one person may not necessarily be what’s best for another. But at least you won’t have buyer’s remorse later on if you take your time and do it right!
2) Finance Before You Buy the Car Loan
Before you even begin looking for a car, it’s important to take into account your financing options. Even if you have enough money in your bank account to pay cash for a new vehicle, that doesn’t mean it’s wise. A good rule of thumb is that if you can afford something, there’s a way to finance it. For example, if you plan on leasing or taking out a loan, make sure your credit score is in good standing; the lower your score (620-700), the more expensive that lease or loan will be. Lower scores also often result in higher interest rates and penalties for late payments.
3) Different Types of Loans
The best car loan varies based on several factors, including your age, salary and credit score. You may also want to consider whether you’re going to purchase a new or used car, as well as what kind of terms you are looking for. There are three basic types of loans: New Auto Loans: These loans can come from banks or dealerships and involve purchasing a brand-new vehicle from a dealer on credit. When obtaining a new auto loan, make sure you understand exactly how much your monthly payments will be before signing any papers. Good credit will help guarantee you get one of these loans, while bad credit will limit your options significantly.
If you have good credit, it’s likely that you’ll have more financing options available to you than if your credit is poor. Used Auto Loans: If buying a used car is more in line with your budget, there are still ways to find affordable financing through an auto loan. The best way to do so is by using an online lender like LendingTree . Used cars depreciate quickly, so it’s important that they don’t carry too much debt when they’re purchased. With online lenders like LendingTree , consumers can find loans with lower interest rates that offer flexible payment plans—making them ideal for those who need lower monthly payments.
4) Understand Your Credit Score
Your credit score is like a personal report card, only instead of letters and numbers it’s made up of data points. The higher your credit score, in general, the better your chances are of getting approved for loans and interest rates will be lower. Remember that different loan providers have their own way of calculating credit scores, which means there’s no one single number you should aim for (you also may not even know what yours is). Instead focus on improving all aspects of your financial profile.
Another factor that may influence your auto loan application is if you’ve recently filed for bankruptcy. Filing for bankruptcy can negatively impact your credit score, so it’s wise to wait six months after your filing before applying for a new loan. It’s also important to note that recent settlements and liens will appear on your credit report and need time to be removed. In general, wait three years from when a settlement is made or a lien is released before applying for new loans.
5) Research All Options
When you are looking for a car loan, make sure you have done all of your research. Look at all of your options before making a final decision on what type of car loan is best for you. By comparing interest rates and terms, you may find that some lenders can offer a better rate than others. However, remember that rates and terms aren’t everything when it comes to finding a good car loan. If a lender’s conditions are too strict or if they require documents that seem unreasonable, consider another lender. Make sure you have compared each provider thoroughly in order to ensure that you find an option that is best for your needs. Remember: it’s your money! Take time and compare different options so you can get exactly what you want!
Once you have found a lender that offers a car loan with attractive rates and terms, it is time to discuss your finances. It’s important that you are honest about your income and expenses. If you tell the truth about how much money you really make or if you hide debt from your credit report, it could result in trouble later on down the road. Keep in mind that many lenders will want an active checking account so they can electronically withdraw payment each month; however, there are other options such as automatically deducting payments from a savings account or having a check mailed out every month. You should also consider what insurance coverage works best for your needs and how much of a down payment you can afford before making a final decision on which lender is best for you.
6) Don’t Apply if you can’t Afford it
In short, if you can’t afford a car then don’t buy one. If your credit is below average and/or you have bad debt like collections accounts or missed payments, then your credit score will likely be in the mid 600s at best. This means that even if you get a great interest rate it will be closer to 15% than 10%. While that may not seem like much on $10k car, paying $1,500 over two years can make a big difference in terms of paying off more of your balance earlier and avoiding finance charges. While it may seem counterintuitive, lower credit scores get worse terms so there’s no point applying for an auto loan if you can’t afford it.
7) Don’t Leave things to Chance
My son just got his driver’s license and he wants a car. Should I co-sign on his loan? Co-signing is one of those decisions you don’t want to chance; your credit will take a hit either way, but if your son can’t make payments on time, it could reflect poorly on you for years. While co-signing doesn’t mean you have control over how your child spends his money or treats his new car, it does give you legal rights as a cosigner and ensures that any missed payments are reported to all three major credit bureaus so they can impact both of your credit scores. Here are seven tips for getting a good car loan
- Don’t leave things to chance: When my son was ready to buy his first car, I wasn’t about to let him walk into an auto dealership alone. He needed someone with experience who could guide him through the process from start to finish—and most importantly, ensure he gets a good deal!
- Start early: If you haven’t started thinking about buying a new vehicle yet, now’s a good time! Decide what kind of vehicle you’re looking for (SUV? Sedan?), then go online and find vehicles in your price range within 100 miles of where you live. The sooner you get started researching potential cars and dealerships in your area, the better off you’ll be when it comes time to buy.
- Get pre-approved: Before you start shopping, it’s a good idea to get pre-approved for a loan. Some dealerships won’t even show you a car unless you’re pre-approved, and if they do, they’ll likely be less competitive on price than those who don’t require it. Pre-approval also shows sellers that you’re serious about buying—and more willing to spend your money at their dealership than somewhere else.
- Find a car that matches your lifestyle: Once you have an idea of what kind of vehicle you want, visit at least three dealerships in person before making a decision. Take notes during each visit so you’ll be able to compare different cars’ features and get a better feel for which type is right for you. It’s also helpful to write down which features are most important to you and why, so when it comes time to buy, your salesperson knows what items are most important and why.
- Choose a car with a long-term resale value: A new vehicle’s price can be deceiving, so be sure you’re comparing apples to apples when shopping around.
- Negotiate from a position of power – When it comes time to negotiate, don’t be afraid to walk away if you feel like you’re not getting a good deal. If you do decide to buy, make sure you’re asking for everything that’s important to you—and not settling for anything less!
- Stick with a dealership you trust: After all your hard work, you deserve a good car buying experience! But if you feel like your salesperson is pressuring you into making a deal, or you get an uneasy feeling while sitting at their desk and signing paperwork, trust your gut and walk away. If it doesn’t feel right, it probably isn’t.
You may be in debt before you buy a car loan, but it’s better to get a good loan than a bad one. If you follow these smart tips, your car-buying experience should go more smoothly and—in all likelihood—leave you with fewer financial regrets. At least now when friends ask how you got your car loan, you can have an answer that makes sense. Or at least one that doesn’t involve time travel.