Chances are if you are in the market to get a new car ( or used one) and need a loan you are feeling overwhelmed. That’s okay. Getting financed is a confusing and scary experience. Especially if you have never bought a new home, etc. But there are tips that can help you be prepared and think about what you want to do.
Choose where you want to finance: Do you want to go through your local dealer or through your bank. There are pros and cons to each, but starting out at your dealership is a great start. they will often provide you with a great rate, and also are happy to work with you even if you have no or bad credit.
Check your credit: You should be checking your credit periodically anyway but if you are like most people (raises hand) you aren’t. Now is a great time to check your credit. Your credit score will play a key role in the rate you’ll pay for your loan. A high credit score can help you get a low car loan rate, which in turn saves you money on interest.
Pick Your Payment: Car loans typically come in 3-, 4-, 5- and 6-year terms. The longer the term of the loan, the lower the monthly payment. But a longer car loan also means you are likely to be “upside down” for a longer period of time. To be upside down (or “underwater”) on a loan means you owe more than the vehicle is worth. Also don’t forget to factor in your insurance, maintenance, and gas costs.
Get Pre-Approved: If you qualify for a loan, you’ll get a “pre-approval” that will be good for a certain period of time and up to a certain amount of money. It’s sort of like having a blank check to buy your vehicle. You can always spend less than the amount for which you are pre-approved, but you can’t spend more, unless you want to make up the difference in cash or by trading in your current vehicle. If you do buy a vehicle for less than the amount for which you have been pre-approved you won’t get the difference back in cash; you’ll just get a smaller loan.
Choose your vehicle: Yes, you read right. The steps above should be done before even choosing a vehicle. Especially the pre-approval. If you are pre-approved you don’t have to worry about negotiating financing, just negotiating an amazing price for your chosen vehicle.
After doing all those steps all that is left is your paperwork and paying for your loan. Make sure to make your payments on time. Being late on payments ( even a few days) can hinder financing for other big purchases.