6 Things to Do When Shopping for a Car Loan
You’ve decided it’s time that you purchase a new-to-you car. Even though purchasing used means the car won’t cost as much as a brand new car, you realize you still will need to find a car loan.
Take a look below for six things you should do as you shop for your loan.
- Visit credit unions, your bank, your auto insurance company, and even bona fide lenders online to find a loan and do this before you start looking at cars. Doing so will let you know exactly how much loan you can afford and also will let you know what your monthly payments and interest rate will be. In addition, credit unions tend to have interest rates between 1 and 1.5 percent lower than traditional banks and online lenders have even lower rates.
- Before heading out loan shopping, check your credit score and make sure there are no errors on it. If you find errors, work quickly to get them fixed because errors that aren’t in your favor can mean you won’t get the best possible interest rate. You want a credit rating as high as you can make it: you should aim for a score of at least 650 and up.
- Once you’ve shopped for a loan for two weeks, stop. The reason is that each time you apply for a loan, your credit score goes down.
- Shop for the total loan amount, not your monthly payment. The lender may try to have you focus on your monthly payment because this could mean the lender could get you to agree to a larger loan amount. Focus on the total loan with the lender and calculate your potential monthly payment in private.
- Make sure the lender knows you’re shopping around; don’t take his best offer at face value as lenders often mark up their rates by one percent (or a bit more or less). Bankrate.com has a tool that will help you find the best auto loan rates for your area.
- If working with the dealer from which you will be purchasing the car, don’t take possession of the vehicle until the loan is completely finalized. Anything from your down payment, length of the loan, your monthly payments, and interest rate could be changed if the financing is “conditional” or “contingent.” Don’t drive the car off the lot until the loan paperwork is complete and finalized.
Don’t dismiss used car loans financed by the used car dealer. If you have poor credit (a score of 500 or below) or have other financial issues, banks and credit unions may not provide you with a loan. That’s where PAACO can be of service. We’ve been helping Dallas-area families with credit challenges afford great used cars for more than 23 years, and we’d look forward to helping your family do the same. Contact us at 877-810-4555 for more information.
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