For many people, buying a new car can be the start of an adventure. However, most people who are just starting out can’t afford to buy a new car without an auto loan. A little planning is all it takes to find an affordable auto loan that meets your needs. With these tips, you’ll walk away with your dream car without taking on unmanageable debt. Here are the top tips to find a good auto loan:
Have Good Credit
You want the best credit score possible when applying for an auto loan. This is the most important thing a lender is going to look at. They’ll most likely approve you for a loan if you have good credit, and you’ll probably have a low-interest rate. With poor credit, however, you may be denied or given extremely high-interest rates.
If your credit score is poor, you can do a few things to improve it. Start out by getting a credit card and using it for small purchases. If you pay it off on time each month and keep the balances low, your credit will build slowly but surely.
Research, Research, Research
Do the research ahead of time in order to arm yourself with the knowledge you need. You can compare rates from outside sources before going to the dealer. This is the best way to go, as credit unions and banks usually offer better interest rates than dealers. Getting pre-approved for an auto loan before negotiating with the dealer also gives you more leverage to negotiate a better rate.
Know What To Look For In A Lender
The best lenders will offer all or most major types of loans. If you want to buy a used car, you need to make sure the lender offers a used-car loan. Lenders who provide instant or same-day online approval will speed up your search. You also may want to take advantage of online payment calculators to help you tally overall costs. This helps you get the bigger picture when comparing rates, preventing you from being blindsided by hidden fees.
Choose A High Down Payment
Your down payment will reduce the principal of your auto loan, which reduces the amount of time it takes for you to pay the loan back. The higher the down payment, the faster you pay the loan back, and the less interest you end up paying. While 0% down payments are available, these are rarely a good idea. Cars depreciate in value quickly, so if you choose to sell the car, you have to pay the difference out of pocket. Try to make your down payment at least 5%, as this is the average.
Don’t let choosing an auto loan to overwhelm you. If you do the research ahead of time and know what to look for, you’ll be sure to find something that works for you. It’s worth the effort to find a quality auto loan that won’t put you in major debt.
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