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Car loans are an important way to finance the purchase of a car or truck. For some, it is essential they get an auto loan, which is why there are so many different options available to them. But, like any other loan, it does come with a number of pitfalls. If you go out and sign up for a car loan with a bad information, it could end up costing you money. And, if you are not careful, it could end up costing you more than you should be paying.
Whether you get your car from a dealership, a private seller, or through a friend, it’s always a good idea to shop around before you commit. But for all the resources available on the web, how do you really know all your options? In this article we discuss important elements that are not to be missed while taking a car loan. Read on!
1. Check Your Credit Score
Your income and your score on the credit card determines if you qualify for a loan or not. The interest rate is an important element here. We recommend never to apply for a car loan unless you have a good credit report. If your report consists of incorrect and bad information, the loan won’t be passed through and might as well be considered as fraudulent activity. You can request a free copy of your credit score every 12 months. You can also get online credit reports. If you see any errors on your credit report, fix it as soon as possible before applying for the loan.
2. Apply for Car Loan from Multiple Lenders
After verifying your credit score is good and ready for a car loan, take a look at car loan lenders. In the United States, there are various firms where you can request a car loan from for example, national banks, community banks, online auto loan lenders or under dealership finance. However, make sure to acknowledge these few terms that you might face while you apply:
a. APR (Annual Percentage Rate): Interest or fee you pay to lend money
b. Down Payment: A small percentage of amount you pay while purchasing on the loan
c. Loan Term: Length of the loan
d. Taxes: The taxes you pay while you buy the car
3. Pre-approval of the Car Loan
After you finalize the loan lenders, you can now analyse the interest rate they have to offer and make a comparison. Get lenders that compete with your business and try to get the best interest rate for you. Once you are ready, apply to lenders for preapproval within the 14 days to minimize the impact on your credit score.
4. Get the Right Amount
Make sure to get the right amount of loan and if the banking is asking for a huge amount of down payment analyse if the offered price in on-road or ex-showroom. Don’t get unnecessary amount in a loan if it’s not needed. This is be helpful to maintain your credit score and your reputation.