If you're like many car buyers, you probably don't plan on paying cash for your next vehicle. Whether you're buying new or used, auto loans exist to make car-buying a little easier on your wallet. Still, if you've never applied for a car loan before (or if it's been a while), there are some steps you'll want to take before you submit that application that can make your car-buying experience a more enjoyable one.
Check Your Credit Report
Start with a quick credit check-up. Most lenders rely heavily on your credit score to determine whether you'll be approved for a loan and, if so, what kind of interest rate you'll qualify for. This is a good time to not only review your credit score but to scrutinize your credit report for possible errors. If you catch any mistakes on your report, be sure to dispute them right away so you can have them resolved and enjoy the subsequent credit score boost before you apply for a car loan.
Save Up a Down Payment
While it's possible to get approved for a car loan with no money down, this only means you'll end up paying more in interest over the life of your loan. Whenever possible, you'll want to set aside a decent down payment on your car. Not only will this mean less interest paid over time, but a larger down payment can also make it easier for you to get approved for financing.
Know Your Finance Options
Not all car loans are created equal! Take time researching your options so you can determine which type of auto loan best suits your needs. If you have less-than-stellar credit, for example, a dealership loan may be a viable option because these loans often do not require a credit check. Individual banks and even credit unions also offer car loans, so be sure to do your homework and find the option with the best rates and terms for you.
Consider a Pre-Approval
Another step to consider before applying for a car loan is to submit an application for a loan pre-approval. This process takes just a couple minutes of your time and can provide you with a pre-approval letter; you can then take this letter to your local car dealership. By demonstrating to a dealership that you've already gotten pre-approved for a loan up to a certain amount, you may be able to better negotiate a great deal on your next car.
Buying a car can be fun, but you'll need to figure out your financing first. By taking these steps, you'll be well on your way to an auto loan that works for you!
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