Most car buyers focus all their energy on finding the right car. And, there’s nothing wrong with doing this if it’s an all-cash deal. However, if you need financing to buy your car, it’s important to figure out your budget and choose an auto loan that has a competitive rate. If you’re unsure of how to go about this, we’ve put together a step-by-step guide on the topic. Read on!
Step 1: Know The Language
Before you start looking for loans, it can really help to know certain key terms that you will likely hear from financiers. So, familiarize yourself with terms like interest rate, finance charge, loan term, principal, down payment, monthly payment, etc.
Step 2: Check Your Credit Score
Your credit score indicates your creditworthiness and repayment capacity to the lender. A high credit score indicates that there’s a good chance of the borrower repaying the loan as per the agreed-upon schedule, while lower scores indicate the opposite. Given this, lenders offer better rates to people who have higher scores.
Step 3: Compare Car Loans
Next, you should compare the different car loans that are available. While large banks will typically charge you a higher rate, you can count on community banks and credit unions to offer your better rates and terms. But, make sure to do a thorough comparison and choose a loan that seems good to you.
Step 4: Apply For The Loan
Once you’ve shortlisted a few different types of loans, you can apply for pre-approval. Once you are pre-approved, you’ll have an offer in hand from the financier. Make sure to only visit the dealership once you have an offer from a lender since this could help you negotiate for a better financing offer from the dealership itself. Since the dealership will not want to lose your business and they know you already have a pre-approved loan offer in hand, they will be more likely to bring down their rates.
Step 5: Finalize The Deal
Once you’ve decided upon an offer that works for you, you can go ahead and finish up the paperwork. It’s vital that you read the fine print before you sign any documents. Don’t be afraid to pull out of the deal if you notice any issues with the paperwork.