The dream of owning your own car is a few steps closer to reality. Now that you have narrowed down your car search, you just need to get a car loan. Before committing to a loan, you need help finding one that meets all your needs.
Let our guide make your car loan search a lot easier. Follow these basic steps and you’ll find the right lender.
Step #1- Review Credit Report
Request a copy of your credit report from all three major credit bureaus. Examine the report for any errors that may hurt your credit score. Any score in the 700s improves your chances of getting lower rates, 600s are good too but you end up paying higher rates.
Having bad or no credit doesn’t completely eliminate your chances of getting a car loan, but it makes it harder, and your rates increase.
Step #2- Assess Finances
Look over your income, expenses, and price of car to see if it’s the right time to buy a new vehicle. If you have a lower credit score, wait until your credit and finances improve before applying for a car loan.
When assessing potential loan payments, make sure to include car insurance and maintenance costs. Additionally, consider the length of loan period. Most car loan companies have four, five, or six year loan plans.
If you are not financially stable enough yet to get a loan, set a deadline. Motivate yourself to fix your finances by picking a car purchasing date, and then meet the deadline by making the necessary cutbacks, extra payments, and changes to your sources of income.
Step #3-Shop Around
Get pre-approved for a car loan. Then visit different banks and credit unions to set up meetings with bank managers. Dress business casual at these meetings so that your outfit reflects your professionalism. Use Groupon 6PM coupons to make your outfit, from head to toe, look sophisticated and polished.
Get quotes at these meetings. Then read customer reviews and examine these businesses’ BBB ratings. Don’t limit yourself to local credit unions and banks: apply for car loans online as well. Pick whichever car loan process feels most comfortable.
Step #4-Gather Documents
LendingTree provides a full list of required car loan documents. A few important pieces of paperwork to make sure that you bring are a bank statement, and any other documents that shows your history of payments, like credit card statements, student loan and mortgage payments. Also provide proof of your yearly income and a recent pay stub.
If you’re self-employed bring your tax returns for the last two years. Other things to include are your car note, insurance papers, and all sources of income (e.g. alimony, child support, social security, etc.).
Step #5-Make a Down Payment
The Nest recommends that you pay 20 percent of the car loan off during the first meeting. This allows you to lower your loan bill and rates, and this payment makes it easier to pay back your loan in less time. Make it a goal to save at least 20 percent of the car loan total before signing the contract.
Keep the loan and car bill lower by avoiding purchasing any extras. Wait to purchase any additional items until later to ensure that you don’t waste money by getting stuff you don’t need.