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.

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