There are certain things every car buyer should know before they borrow. The more information you absorb about financing a car purchase, both within or outside the dealership you are working with, the more likely you are to receive the deal best for your unique circumstances.
Your Credit Rating
Before you borrow, it is vitally important you know and understand your credit rating. With most lenders, your credit score will directly affect financing approval limits. Interest rates, length of the repayment term and approval in general are all impacted by your credit rating. Look up your detailed credit report to determine your current score.
Look over any negative aspects of the report and make sure there are no errors. Remember that a limited credit history can be just as detrimental as a poor credit rating. Once you know your credit score, whether it is good or bad, you will have a better idea of the kind of financing you should pursue.
Be Informed
Never borrow without going over every aspect of the financing package you are receiving. It is important that you understand the structured payment schedule, how much you will inevitably pay after interest is included and other financing terms.
This process of going over and understanding the loan you are attaching yourself to is equally as important if you are cosigning a loan for someone else. Many well-intentioned cosigners fail to understand the terms they are agreeing to, including being held responsible financially if the car loan defaults or if the vehicle is repossessed.
In-House Financing Options
Every car buyer, especially those with a poor credit rating or limited credit history, should look into every financing opportunity, including in-house financing through the dealership. Many dealerships extend high risk loans to applicants with credit score concerns, as long as a minimum income and ability to make payments is demonstrated.
This option is ideal for those who have had issues getting approved for more traditional loans but are able to keep up with monthly payments without an issue. The in-house financing will allow you to purchase the car you need while adding positive activity to your credit history. Ask the dealership if your payments, or lack thereof, will be reported to a credit bureau. When financing activity isn't reported to a credit bureau, your credit score will not be affected.
When it comes to borrowing money, knowledge is an extremely important tool. Be aware of your realistic financial limitations, credit rating and the terms of the financing agreement.
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