Auto Loans for The Car of Your Dreams

When it comes time to buy a new car, few have little choice but to get an auto loan. This can be a daunting task but armed with the right information, you can keep yourself from getting trapped into an auto loan that can end up being a burden in more ways than one.

Knowing what you want and what you can realistically get before you apply for a car loan means you control a situation that easily gets out of control for those who choose to walk into an auto loan unprepared.

Know Your Credit Score

A majority of people think merely reading the ads in the newspaper and figuring out how much they can afford for a car payment is the first thing to do when making a new car purchase. Although figuring what your budget will afford is a very good thing to do, when it comes to getting the car loan that will even make the payments a reality, there is something else that needs to be done.

The first thing that does need to happen is a little bit of research- but the research needs to be about you. You may think you know all there is to know about yourself but do you know the most important thing when it comes to getting an auto loan? It’s your credit score.

This number helps determine whether you will be approved for an auto loan that lets you go home in a new car. (It’s also a safety measure for when unscrupulous salespeople try to tell you your score is too low for their low financing car loan program and thereby unnecessarily fixing you with high interest rates!)

There are three credit agencies: TransUnion, Experian and Equifax. There are many sites online that will give you gain access to your score from all three agencies for a fee. Your credit score will help you to identify not only whether you will be able obtain an auto loan but if there will be high interest rates attached to it!

Check Online Auto Loan Rates

When it’s time to finance a vehicle, don’t rely exclusively on the dealership for an auto loan. The 0% financing they offer is only for ‘qualified buyers’, which a majority of us aren’t. Not only is your bank or credit union probably a better choice for a car loan but there are some very reputable Loan Providers for online auto loans that also have really great rates.

Online lenders not only tend to have better loan rates but the loans are easier to apply for. You can also find ‘car loan calculator’ tools online that will help you figure out what car payments will be with different interest rates. Then you can see for yourself what the auto loan is truly going to cost you at different interest rates.

Knowing what you can afford will help you pick out the car loan that is right for you and keep you from being swindled into an auto loan you can’t afford!

Applying for an Auto Loan

Despite ads and dealerships that guarantee approval for auto loans, it is widely advised that any one person with a credit score of 600 or under should wait to apply for an auto loan until they can up their score to around 680 in order to get good (or at least better) interest rates.

All credit card balances need to be in good standing and the longer you have been at your current residence, the better. The same goes for being with an employer.

All these things will make lenders more comfortable with providing you with an auto loan. Upon receiving your credit report from the credit agencies, make sure all information in the report is correct and remove any mistakes or discrepancies by contacting the creditor who made the error. Doing this will improve your credit score and increase your chances for getting a decent auto loan with decent rates.

Applying for Auto Loans with Bad Credit

Banks, credit unions and other loan resources make their money from the interest rates on the auto loan. As far as they see it, the lower the credit score, the higher the risk that the loan will not be repaid.

The higher the risk, the higher the interest rates. While some dealerships may offer a lower monthly payment for your car loan than your bank, this usually has to do with the number of months that the auto loan will be for. The longer the term of the loan, the lower the payments will be.

However, depending on the interest rates of the car loan, this can mean you end up paying more for the car in the long run. Try not to focus so much on getting a low monthly payment; that way, 4 years down the road you won’t still be paying off a car loan and owing more than the car is worth!

You may also be asked to get someone with better credit to co-sign for your auto loan. This is a risky move. Many do not want to co-sign for a loan when it is common knowledge that the co-signer can be held responsible for payments should the loan be defaulted on. The best bet for not-so-good credit is really an online lender.