Top 4 Car Loan Red Flags

If you are like most car buyers, you much search car loans before purchasing your next automobile. When looking for the right loan and lender, watch for certain warning signs you are about to get a bad loan. Here are the top four most common car loan red flags.

You Don’t Know Your Credit Score

If you are shopping for a car loan without knowing your credit score, you are making a big mistake. Auto lenders judge your creditworthiness by looking at your credit score. Since they will know your score, you should too. If you don’t, you are not in the best position to negotiate favorable loan terms.

You Haven’t Considered All Your Options

There are many institutions that finance cars. Banks, credit unions, financing companies, and dealerships all might offer you a car loan. If you haven’t considered each of these options, you might not be getting the best deal. As such, before you go shopping for your new car, look around for financing options.

You Have Fallen in Love With a Car

Whether it’s the engine capacity or the leather seats that drive you wild, it’s okay to fall in love with your car. It is not, however, okay to fall in love with it when you are negotiating your car loan. When bargaining for the best repayment terms possible, you don’t want your emotions to take control. Try finding a car you like and waiting to fall in love with it until you drive it off the lot.

You Don’t Know What Competitors Have

Unless you know whether you can find your car at another dealership, you won’t be in the best position to negotiate beneficial loan terms. If you can walk away from the table and buy your car elsewhere, you will have enhanced bargaining power.

When searching for car loans, make sure you watch for these red flags. If you notice one of them, you should probably rethink your car loan.

How to Get a Car Loan

Buying a car can be a daunting process. The sheer number of makes and models can be overwhelming. Before you go shopping, the first thing you should do is look at auto loans. Here is what you need to do to get the best financing deal possible.

Check Your Credit

First, take a look at your credit report. If you have a high credit score, you should be eligible for a lower interest rate. If you notice any unusual activity or incorrect information, get it resolved before you apply for financing. You can boost your credit score by paying off any small debts or credit cards.

Look at Your Budget

Figure out how much of a monthly payment you can afford. If you don’t know what your monthly cash flow is, calculate your yearly income, expenses and savings. Divide that number by 12. This should tell you how much you can afford to pay toward a car each month. Also, don’t forget to account for the cost of auto insurance, registration and repairs.

Shop Around

Compare different auto loans by visiting your local bank and credit union. There are lots of options online as well. Look at different factors such as interest rates, down payment amounts and the duration of each loan. Most car loans last for four to six years, so you should compare monthly payments based on different timeframes.

Get Pre-Approved

Once you have found a financing package that you like, get pre-approved. The lender will tell you how much you can borrow and the interest rate. Please note that your authorization is time-limited, so you may need to move quickly to purchase a car once your application has been processed.

Since you took the time to investigate auto loans, you should know what type of car you can afford. Now you can worry about more interesting issues, such as gas mileage, size and color. If you want to sweeten the deal further, don’t forget to take advantage of rebates and dealer incentives.