How can you find the best car loans? By simply doing your homework. Sure, it might not sound glamorous, but doing your homework is how to find the best car loans, regardless of your circumstances. Whether you’re looking at online car loans or more traditional ones from banks and credit unions, conducting solid research is the only way to start.
1. Check Your Credit Report
Even if you’re certain you have excellent credit, checking your credit is always the first place to start. You’re entitled to a free copy of your credit report from each of the big three agencies (Experian, Equifax and TransUnion) every year. Get yours before applying for a loan. There may be surprises of which you were unaware. Credit histories do contain errors from time to time. Those mistakes can lower your score, which can make you pay more for a loan. Checking your credit score first will give you time to fix problems before you begin shopping for your car.
2. Determine Your Budget
Make a list of all of your monthly household expenses and other financial obligation- including savings and investments. Total them and subtract the sum from your monthly take-home pay. The difference between that and what you’d like to hold in reserve for entertainment, clothing and the like represents what you can afford to pay for a car each month. Bear in mind car expenses also include insurance, registration fees, fuel and maintenance.
3. Figure Out What Price You Can Afford
Platforms offering online car loans have calculators you can use to get an idea of the total purchase price you can afford-based on the dollars you have available for your down payment and your monthly payment. While these tools allow calculations up to 84 months, don’t look past 60. When loans get that long, especially on used cars, you’ll run into repair costs while still making payments. You’ll also pay more for interest, which makes the total cost of the car higher.
4. Get Pre-Approved for a Loan
Once you know what you can afford, seek financial backing before shopping for the car. Online lenders are especially good for this, as they will pull your credit report once and shop it to several lenders to find the best deal it will support. This is important because having too many credit inquiries will impact your score negatively.
Having a pre-approval helps you avoid overspending, puts you in a better bargaining position, and you can let dealers try to beat your pre-approved deal to get an even better rate.
5. Negotiate Based on Price
With your pre-approval in hand, you can negotiate based on the price of the car instead of the monthly payment. Remember, while payments can be made lower by stretching out the terms of the loan, you’ll wind up paying more in total for the car. Always negotiate on price rather than payments.
6. Do Your Due Diligence
Read the contract carefully before agreeing to accept a loan. Make sure the numbers add up correctly. Don’t accept contingent deals as these leave people room to alter the terms after you’ve signed. Avoid loans with prepayment penalties and make sure everything you agreed to is reflected in the contract.
You’ll also want to check the reputation of the lender with the state attorney general’s office, the office of Consumer Affairs and the Better Business Bureau. Look at the pertinent peer review sites (such as TrustPilot) to see what people are saying about them. Yes, there’s a lot to do here; but it’s also how you’ll find the best car loans-regardless of your circumstances.