It’s very common for auto buyers to put most of their effort into looking for their perfect car – only thinking about financing at the end of the journey. While getting the vehicle of your dreams is critically important, knowing how to pay for it and then getting a car loan are also critical parts of the buying process.
Very few buyers can afford to pay straight cash for the full price of a new or used car. Instead, you will need to get an auto loan to cover the entire cost of the vehicle or at least a substantial part of it. Here’s what you need to do before you get a car loan.
Understand Why Your Credit Score Matters
Your credit score is a testament to your creditworthiness and your ability to repay an auto loan and other types of loans. High numbers are an indicator that there’s a good chance of the borrower paying back the loan, while lower numbers indicate a greater probability of loan default.
Find and Fix Issues in Your Credit Report
The absolute worst time to find out that there are issues with your credit is when you’ve decided on a vehicle, and are trying to make the purchase. Most buyers have no clue what their credit is until they’re sitting in the dealership’s finance office, which then leaves them susceptible to accepting a lousy financing deal.
Find a Good Financing Deal
Every lender charges auto loan interest rates depending on your creditworthiness, market demand, the amount you’re borrowing compared to the vehicle’s value, and your appetite for risk. Do some research to find competitive rates and promotional offers with generous terms that suit you.
Apply for the Loan the Right Way
You should apply for a car loan from different lenders, which might take a bit of time and you’ll need to provide your personal information to a number of lenders. If you space out your applications over months, each application knocks your credit score down a few points so do them over a short period.
Start Shopping for A Car
After you’ve researched the used or new car financing that is available and you have a preapproved deal handy, it’s time to go car shopping.
