Credit Report Check
Your credit score and income decide how much you can borrow and at what rate. So check your credit report and correct any mistakes it may have. If your score is under 600, and buying a car isn’t urgent, spend six months improving your score. You’ll get much better terms on your loan.
Apply to Multiple Lenders
The smart thing to do is explore your options. Apply to large national banks, local community banks or credit unions, and online lenders that specialize in auto loans. Ensure that your APR is low, your loan term is less than 60 months, that you offer a large down payment, and factor in all taxes and fees.
Get Preapproved
Once you’ve shortlisted lenders, apply for loan preapproval. It requires a hard credit pull, so ensure you make all applications in the same two-week period. Provide accurate details for an accurate preapproval amount.
Set Your Budget
Go to an online auto loan calculator, enter your preapproval loan offer amount, add 10% to cover taxes and fees, enter down payment and trade-in value of your current car, and the lending terms to find the right monthly payment amount. If it’s too much, borrow less.
Find a Car
Check the loan terms for excluded car brands, dealership requirements, how the lender will send the money, and any time restrictions on the loan offer. Then set out and find a car that matches your needs and the lender’s terms.
Check the Dealer’s Offer
After you know which car to buy, see if the dealer can beat the terms offered to you by the lender.
Finalize Your Loan
If the dealership beats your preapproved rate, then you’re just got yourself a great deal. But there could be hidden dangers. Before signing the contract, ensure that there are no fees apart from sales tax, documentation fees, and registration costs. Don’t allow the dealer to add more months on your loan term. Don’t accept add-ons you didn’t request, and ensure that there is no early payoff penalty. Do not drive the car away until the financing is finalized. And make all your payments on time.
