When you’re ready to begin car shopping, it’s important to become approved for a car loan before you make an offer to avoid common scams and high interest rates. Although it may seem easy to apply for a car loan, there are a number of different factors that contribute to your eligibility. To get a great car loan that fits within your budget, there are a few ways to score a good deal.
1. Improve Your Credit
Your credit is one of the most important factors of your application that lenders will analyze. It’s important to obtain three separate copies of your credit report from different agencies, which are free to obtain once a year. The higher your score, the lower your interest rate will be. Work towards having your credit score in the 700 to 800-range, which will prove that you have a strong credit history and are a reputable borrower.
- Avoid the Dealership
Although it may be easier to obtain an auto loan through the dealership where you want to purchase a new car that you’ve fallen in love with, this can lead you to pay more in the long run. You’ll likely have a higher interest rate and pay more due to a cut that the dealership gets by connecting you with a financial agency. Instead, apply for a loan at a credit union or community bank to obtain a better deal that is more in your favor.
3. Avoid Looking at the Monthly Payment
Many ways that lenders often deceive borrowers into signing up for bad loans is by enticing them with the monthly payment instead of the total loan amount. This is a common trick that can cause you to borrow more money than necessary. Look at the total loan amount and how much you’ll pay additionally in interest over time.
4. Shop Around
To save hundreds to thousands of dollars on a car loan, it’s important to do your homework and shop around to compare interest rates. It’s also important to look at the length and term of the loan before agreeing to anything, which can certainly tack on more dollars if you’re not careful.
5. Use an Organization that Only Does Car Loans
To obtain the best car loan, go through an establishment that is an expert and solely works with loans. Choose a financial institution that doesn’t have hidden fees and is honest with the fine print and terms. They often offer competitive rates and are more reputable with their loans.
6. Research the Lender
You may score a great deal on a car loan that allows you to purchase the car of your dreams with a low interest rate. However, you may be falling into a scam if you’re working with a lender that has a few red flags in their history. Investigate your lender by contacting the state attorney general’s office or the Better Business Bureau. You can also conduct an Internet search on the company to learn of what past customers are saying with their reviews.
7. Avoid the Yo-Yo Scam
Customers are often enticed to purchase a new vehicle in a matter of seconds after the dealership tells them that the financing has been squared away. After driving the car off the lot, they then receive a phone call a few days later stating that the financing wasn’t approved and that they’ll have to pay a much higher rate. The bait-and-switch scheme is a common trick from dealers that is frequently used, but can be avoided by requesting that the car is delivered once the financing is finalized.
By : Vincent Stokes