When it comes to buying a car, finding one that you love from the vast array of options is only part of the work. Searching out and securing the right car loan is an almost bigger task. For those who have had previous issues with credit or first-time buyers, this can be an even larger headache.
Though with developments in auto loans and credit unions, seeking out a car loan is becoming more manageable. If you're in the market for a vehicle, we've drawn together 10 quick tips on how to get a car loan.
1. Research your loan separately from your car.
It may be tempting to treat your purchase like a one stop shop at the dealership of your choice, but before you even step on the lot and start car negotiations you should be shopping around for your car loan. Credit unions often offer flexible options at competitive rates. This also enables you to arrange pre-qualification for a loan, so you can essentially start your car shopping with a blank check up to a specified amount, which will help you in searching for the right car. This will also help you to negotiate with your car dealer on the model you select.
2. Know your credit score.
It sounds like a no brainer, but knowing your own credit score and credit history is crucial in securing a loan. Your credit score will be used to inform your lender of what they can or should give you, so having an idea of where you stand is important. You can obtain free copies of your credit report online or from credit score agencies.
3. Understand the timeframe of your loan offer.
Likewise, it's important to understand that every time you apply for a loan, if you're approved or not, your credit score goes down. If you've applied for a car loan and then don't buy until weeks or months later then it can become more difficult for you to get a prime-rate loan. You normally have a two-week window to get all your applications in and secure purchase, so make sure you're working within that time frame to keep your credit score intact.
4. Do some credit history clean-up.
If you find that your credit history is less than ideal you can do a number of things to improve it. In order to get a better loan it's crucial to demonstrate to your lender that you can handle it. You can do this by paying your other bills on time, paying off your credit card balances if you have any, and settling in other unpaid loans. If you have open lines of credit already that you can't immediately pay then obtain some documents to prove that you have the ability to make payments on them.
5. Shop for your total loan amount, not the monthly payment.
The amount you request for a loan should be made in light of the loan amount and not the full monthly payments. You should definitely consider your monthly payments in your private calculations about what you can afford to pay and maintain for your vehicle. Focusing on payments may force you to borrow more money to drive your car as it ages, which you can avoid by only requesting what you need for the loan portion.
6. Save up for a bigger down payment.
Similarly, to avoid being refused a loan or to keep your loan amount down it helps to start your car shopping with a large down payment. If you can save up than a large down payment is the best thing you can do to get approved for a loan quickly. A 20 percent down payment is a great rule of thumb, but if you can put down a larger sum the better and faster things will go to get you into the driver's seat.
7. Stay away from new debt.
Even if your loan is approved you're not out of the woods yet. Avoiding any new debt while going through the car purchasing process will help safeguard your lender from stopping your loan should any new debt appear on your history.
8. Understand your car loan requirements.
Certain lenders may have different requirements for their car loans. When you're shopping around for the best deal doing your research on what is required for each loan and provider is a good idea. Sometimes you may need additional requirements or paperwork so it's important to understand what is needed by your lender so you don't delay the process or disqualify yourself from the loan.
9. Be honest about your financial situation.
Don't lie about or inflate your income details on your loan application. This will only hurt you in the long run as lenders double check the credentials you provide and not being honest can not only cause your loan to be denied but it can damage your chances of obtaining future loans. Furthermore, you could be prosecuted if you're unable to make loan payments because you were dishonest on an application.
10. Speak to an expert.
It's useful to speak about your situation and different options for securing a car loan with an expert. At Deer Valley Credit Union we can assess your needs and talk about what you need in a car loan. Whether you want to chat about our loan options or need some guidance on the process one of our representatives is here to help.
Rates, terms, and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.