We all know that when purchasing a car, it’s ideal to pay in cash, whether you pick up a brand new one from the car dealer or get a preowned vehicle from a friend. It is a fact that auto loans help us a lot, just like our fours wheeler does! But before buying the car, you will have to borrow a loan to make the purchase. When filling out the loan application, you will get a closer look at sales tax, extended warranty, auto loan insurance, and all the dollars you will be paying. Let’s look at the five things to know before applying for a car loan:
1. Know your credit score
Your credit score plays an essential factor regardless of what loan you take out. It is responsible for determining everything! When I say everything, it means EVERYTHING from your auto loan interest rate, monthly payments, and even the “yes” or “no” from the lender depends on how good/bad your credit score is.
Keep in mind that every lender uses a different scoring system. Their criteria for approval may differ from the other lender, so be mindful of which company you are choosing.
2. Take 14-days to apply for all the loans:
When a lender inquires about your credit history, there is a slight decrease in your credit score. But if you manage to complete the application process in 14 days, you minimize the negative influence. For this purpose, you should pre-arrange your auto loan plan to avoid multiple hits on your credit score.
When the “shopping period” is restricted to 14 days, all the inquiries made will be considered one. Therefore, your credit score won’t be affected much.
3. Get pre-approved and then shop for loan rates
Isn’t it great to walk into a car shop with an already established financing offer by a bank or credit union? Such a pre-approved finance offer ensures that you already have a loan offer for your loan. It also relieves your mental stress, and you can focus on purchasing a car of your choice.
Planning gives you control over many auto loan refinancing factors, including your monthly payments, interest rate, etc.
Another added benefit of having a loan offer already with you is that having the loan allows you to control the prices and features. With the loan in your pocket, you will enjoy the upper hand.
4. Do calculations before signing a deal
As you are stepping into financing your car, you must be aware of the factors that will determine your monthly car payments. The interest rate takes up only a minor portion of it. But as you step into a car dealership, you will be welcomed by many additional costs.
To be precise, sales tax highly impacts the monthly payments the most. However, it is not the only thing that makes up your costs besides the vehicle’s actual price.
The overall vehicle price also includes the dealer fees and costs of the additional features. Although you can negotiate on what extras you want to add or not. Also, learn how to reject the offer when the overall price is out of your budget.
Use an auto loan calculator to avoid getting ripped off while in a hurry. You can find such resources on the internet for free.
5. Learn about dealership financing
Let’s move to the last out of the five things to know before applying for a car loan. Sometimes, you may find dealership financing the ideal option because deals like cashback rebates and 0% financing may seem to be attractive.
But remember that such offers are only for lenders having a perfect credit score. But on the other hand, if you have any negative on your credit report or a bad credit score, you will never qualify for such offers.