It's just half the fight to get a great bargain on a new automobile; you'll also need a competitive auto loan unless you can buy the car outright. You'll need to compare rates, terms, fees, and prequalification with at least three lenders for the best car loan rate. Shopping around for an auto loan will boost your chances of receiving the best terms on your new vehicle since loan terms vary by lender, borrower's credit, and geographical considerations.
Highway Hero Driving Academy gives you practical tips so you can get the best auto loan rate:
#1 Check and Raise Your Credit Score
First, familiarize yourself with your credit history. Your credit score significantly impacts how much you pay for a car loan. The better your score, the lower your rate will be. You can check your credit score online, and your bank may even give you a free report each month.
Depending on the lender, you may need a credit score as low as 600 to qualify, but for the best rates, you'll want at least a 700. Before applying for a loan, focus on improving your credit score by paying off debt, making regular credit card payments, and refraining from applying for other loans. If a lender decides to give you a car loan despite your poor credit, you might pay a lot in interest. The lower your credit score, the cheaper your interest rate on a car loan.
#2 Do Your Research
When figuring out which car loan is best for you, doing your homework online is critical. Using an online vehicle finance calculator and reading reviews of auto loan lenders may help narrow your choice to a few organizations that may be a good fit for your needs.
When looking at loans, keep an eye out for interest rates, payback periods, the amount of money necessary as a down payment, and any penalties the loan may have. You may also check with the Better Business Bureau to see whether the lenders you're considering are legitimate.
To ensure that a lender is legit, do a lot of research into their options, terms, and customer reviews.
#3 Compare the total loan amount rather than the monthly payment
Specific lenders may offer a reduced monthly payment of a vehicle loan by extending the repayment duration and marketing the lower monthly payment. In doing so, you may end up borrowing more money than you meant to and paying more interest over the course of the loan.
Depending on the amount you want to borrow, you may can change your payback terms and monthly payment later if you shop around.
How do you feel about car loans? Did you feel like your loan was overpriced? Let us know in the comment below!