Many people look at a car loan’s monthly payment and forget to consider the total costs of financing a car. By taking steps to shop around for the best car loan terms, you may be able to save thousands of dollars by the time you pay off your loan. Here are some steps to take when you’re looking for an auto loan. Ready for more? Let’s get started.
Determine Your Budget
If you walk straight into a car dealership, the first thing an auto dealer may ask is, “What’s your monthly budget?”. If you only focus on the amount of your monthly payment, you’ll overlook the fact that your loan is for a longer-term than you want. That longer loan term may mean a lower monthly payment, but you’ll just make more payments, and pay a lot more interest than you would’ve with a shorter loan term. A better way to approach an auto loan is focusing on the overall cost of the car — i.e., the final price tag, including the number of payments and interest you’ll pay.
Check Your Credit Scores and Reports
Check your credit scores and reports before applying for a car loan. If you have a low credit score, you’ll probably qualify for higher rates than if you had a high credit score. If so, you should think about whether you must proceed with getting an auto loan or work to improve your credit first. If you already have a good credit score, congratulations! You’ll be able to use your good credit as a bargaining chip with lenders to negotiate better loan terms on your car loan.
Shop Around for Car Loans
Once you know what size loan you can afford and you have a good idea of where your credit stands, you may be ready to start shopping around for rates.
Here are three main places to apply for a car loan-
Banks or credit unions
Dealerships
Online lenders
Visit, email, call, or check the sites of a number of banks and credit unions to ask for a car loan quote.
