In the United States, owning a car is almost as important as having a place to live. It’s a necessity for many people, but it can also be very expensive. Fortunately, there are many different types of loans available to help you finance your car purchase. But one of the most common types of financing that people opt for when purchasing a vehicle is the car loan. If you’re applying for a new car loan, here are a few things to keep in mind.
Know Your Credit Score
Before shopping for a car loan, it’s essential that you know your credit score and check if there are negative details added to your report. If there are any errors or suspicious entries on your report, it’s best to have them corrected before applying for financing so they don’t affect the interest rate you qualify for.
Get Pre-Approved
Before you start shopping for cars, get preapproved for an auto loan. This will give you an idea of what kind of monthly payment you can afford and how much you’re going to pay for the car itself. This way, you won’t end up wasting your time looking at cars that you can’t afford.
Shop Around for Lenders
When you’re ready to buy your car, shop around for lenders who offer competitive interest rates and terms. Once you find a lender that offers a good deal, ask them if they can beat it by offering even lower interest rates or longer repayment periods (which means lower monthly payments). Then, take your offer to the dealership and check if they can offer you an even better rate. It may seem like a whole lot of legwork, but you could save a lot of money by shopping around.
Don’t Take out More than You Need
Make sure that your lender doesn’t approve a loan amount that is more than what is needed to purchase the vehicle and cover taxes and fees associated with purchasing a new car (such as title transfer fees). If they do approve an amount that is too high, your dealer may try to sell other products such as extended warranty coverage or gap insurance — things that are not necessary when buying a new car.
