Understanding Auto Loans: 5 Tips for Securing Your Dream Vehicle
So you’re ready to finally purchase your dream car…but you have to secure an auto loan first. Auto loans are one of the most significant financial decisions you’ll make. Knowing the process and following prudent steps from the start of your search can make the experience easier and save you money.
1. Check Your Credit Score
Understand your credit score—and credit report, which details the elements that determine your credit score—before you apply for any loan. A good credit score can net you a better loan rate or even let you skip a loan altogether. Getting your credit score from an agency such as Experian can help you understand your credit standing and guide your decisions.
2. Research Loan Options
You don’t have to stick with the first person or institution you encounter. Compare loan terms, interest rates, and other factors from different sources. You can get loan quotes from various banks and credit unions. Don’t forget to review the Consumer Financial Protection Bureau’s website, as it’s full of valuable information about auto loan and other financial products.
3. Set a Realistic Budget
Know what you can afford to pay before you apply for a loan. Factor in regular auto maintenance costs, registration fees, and gas. Set a budget and avoid borrowing more than that amount. The Auto Loan Calculator from Experian Car Buying Service™ can help you figure out what you can spend each month.
4. Read the Fine Print
Know exactly what you’re getting into before signing any documents. Read every page thoroughly, paying special attention to any restrictive language. Ask questions about any terms that seem puzzling. If the lender resists, that could be a sign the terms are not in your best interest.
5. Negotiate Your Interest Rate
Understanding your credit score and other factors of your loan request can give you leverage in the negotiation process. Don’t be afraid to shop around for the lowest rate among potential lenders. If you don’t have a really low score, try asking for a lower rate based on your creditworthiness; lenders may be willing to decrease your interest rate and make you a better deal.
Securing the right loan for your dream car doesn’t have to stressful. Armed with the right knowledge and tools, you can make confident decisions about your loan.
