The terms of your auto loan are just as important as the final asking price for the car. Shopping around and negotiating the best car loan terms possible can save you a substantial amount of money and help you avoid getting into a financing agreement that could become unmanageable. The three keys to getting a great auto loan will help guide your car shopping process.
Know Your Credit, Improve Your Credit
Your credit rating has a direct impact on the loan terms for which you qualify. Great credit opens the door to great auto loans. A low or limited credit history won’t preclude you from gaining approval on a car loan you can afford, it just may be more difficult to find as many options that fit your financing needs. Check your credit rating before you start shopping for cars and the loan you need to finance the purchase.
Depending on how far in advance you start planning to purchase a car, you can also take steps to improve your credit before you apply for an auto loan. Carefully check your credit report for any errors that can be corrected in your favor or debts you can repay before pursuing a car purchase. If there is less time to spare before you get a new vehicle, consider using a cosigner on your auto loan who has a stronger credit rating. As your credit improves, you can work toward refinancing the loan in just your name.
Research Is Power
Once you know your credit rating, it is time to research the current trends in auto loan interest rates. An understanding of the market, even a cursory one, will give you the information you need to know if the loan terms you are offered are good, bad or great deals. You should compare interest rates, applicant qualifications and other loan terms available from every financing source. These sources include banks, private lenders, and in-house dealership financing. By limiting yourself to only one kind of car loan provider while you shop for financing you could be missing the deal best suited to your situation.
Shorter Loan Terms
The final key to getting a great auto loan is opting for the shortest loan term you can afford based on the monthly payments. A shorter terms means less interest paid over the life of the loan, which saves you a substantial amount of money on the final cost of your car. Be careful not to overextend your monthly budget to accommodate an unrealistic short car loan term, but do make as much room in your finances as possible to set yourself up with the maximum practical payment.
The three keys to getting a great auto loan are healthy credit, thorough research, and shorter loan terms. Keep these three important factors in mind while you shop for your next car loan.
