Before you get that car you’ve been eyeing for several months now, it’s important to conduct due diligence. The fact is; many people are reneging on their monthly car loan interest payments, which is leading to greater numbers of cars being repossessed than ever before. The first order of business is figuring out what kind of loan you may be in for – depending on the kind of car you want.
When you use this in conjunction with the following few tips, you’ll be putting yourself in the best position possible to get a low-interest rate, short-term loan that you can handle.
First of All – Get Your Credit Reports
You need to know where you stand so that you can better anticipate what lenders can offer you, and what’s fair. You’re allowed a single free credit report annually – by federal law.
There are several websites that facilitate the process of acquisition. Using this single source, you can get separate reports from all three major reporting bureaus – Equifax, TransUnion and Experian.
Getting all three helps you cross-reference to find any discrepancies between what’s on file for you.
After all, a few dozen points wrong on your credit score can mean several thousand dollars’ difference when it comes time to secure a car loan.
The quality of loan you get is directly proportional to your credit; people in good to great standing end up paying less money monthly over a shorter amount of time.
Obtain Consumer Credit Scores
Why the distinction from the scores provided by the government-mandated agencies in the above?
Well, because highly-trafficked websites such as CreditKarma.com and Credit.com provide their own algorithmic credit score which, although it’s based on your credit history, isn’t usually the same number that your lender will see.
It merely puts you in the ballpark, and helps you gauge any discrepancies that you might look into before you go car loan shopping.
Yet another option you have is requesting your credit history from a large credit card issuers. They should be willing to send your score – especially after you apply for a credit card from them.
Check Multiple Sources for the Best Rate
The national numbers are in, and they say that 80% of buyers obtain their car loans from the dealership. This tells experts that people are not shopping around – for whatever reason.
Now, if your credit score is excellent, then you’re almost certainly going to get the best deals available no matter where you go (for the most part).
But if your credit history is less than ideal, then you owe it to your bank account to shop around – there’s a very good chance you get a better deal from a lender outside of the car dealership.
Where should you shop for a loan, then? It turns out that local banks and credit unions often have the best loans with the best terms.
As a rule, the auto loan industry lacks transparency, according to the Center for Responsible Lending. This is why you must be armed with knowledge before making any deals.
Always Opt for the Shortest Loan Offer
Although a longer payment term is tempting because of the lower monthly payments, it is fool’s gold.
With the newer terms being offered stretching eight and nine years into the future, you’re paying far more than the car is worth in the long run.
If you need to go for much longer than about 48 months, chances are – you’re buying a car that’s above what you should be reasonably getting.