You want to buy a car but don’t know the first thing about getting a car loan. There are many steps involved in obtaining a car loan. Simply going to a lender and saying you want a loan is not the best thing to do first. Consider these areas of interest before going to a lender: review your credit report, go over your monthly budget, research interest rates, auto insurance and research different lenders. Following these steps should get you ready to apply for a car loan.
Many people are anxious when they see a car they like and want to buy it. Before going to the bank consider looking at your credit report. Every year you can obtain a free credit report and pay a few extra dollars to get your credit score. By obtaining your credit report yourself, it won’t count as a hit on your reporting history. Things to consider when looking at your credit report are, keep an eye out for items that are strange. Identity theft is a big issue and sometimes people don’t realize their identity has been stolen until they go for a car loan or other types of loans. If there is strange activity on your report, call all three major credit reporting companies: Equifax, Experian and Trans Union and make a report. Also consider your credit score. If you have a low score you will most likely receive a high interest rate, if you have a high score you will most likely qualify for a low interest rate.
This area of interest is very important in terms of the ability to pay monthly for a car loan. Going over areas of your budget such as fixed expenses and pin pointing where the other money goes will help in deciding if you are able to afford the loan. If the majority of your budget is going for entertainment consider cutting back and using the money you save to make monthly payments. A monthly budget will also help in deciding how much of a loan you can afford. Not knowing how much you can afford will lead to future debt problems.
According to investor words, interest rate is a charge or paid for the use of money. Interest rates high or low will be determined by your credit score and the terms of the loan. Understanding those two things should help with having no surprises at the lenders office. Investor words also states that interest rates are calculated by dividing the amount of interest by the amount of principal. The number one thing the lenders look at when determining interest rates are a borrower’s credit score. Having good credit will most likely guarantee a low rate.
A few things you need to know about auto insurance when applying for a car loan. A lender will only lend the money if the borrower has auto insurance. The auto insurance is not only protection for you, but also for the lenders themselves. Having auto insurance protects the lenders investment until the loan is paid off. No matter the year or the condition of the car, any car that is being financed must have full coverage on it until the loan is paid off. This also protects the lenders investment.
Just like researching different sellers for the right car you want; researching the lender is just as important. Each lender will have different incentives that may work in your favor. A good option is to look at lenders who give pre-approvals. This way you have the numbers in front of you in black and white you will be able to choose the best option. This also will help when going to buy the car. Everything is in order and you will be able to negotiate the price to get a good deal in your price range.
After these steps are taken it is time to check out different sellers for that dream car. Finding the right dealer and car is another process that is worth researching to get the best deals. Car dealers like to target the customers who are in the dark about cars and car loans. Knowing all of the facts before walking into the dealer ship will be a plus because the ball will be in your court instead of the dealers.