Americans purchasing a car spent 35% to 95% of 2016's median household income ($57,617), according to Love to Know. As a result, most individuals likely needed a loan in order to purchase a vehicle whether new, used or certified pre-owned. If you need a car to get to work or take your children to school, but do not have enough savings to purchase a vehicle with cash, then you will need financing and will have to find a great loan, in addition to shopping for the perfect car. Consider the following tips to take the uncertainty out of locating a good car loan.
1. Check Credit - If you have a low score, collection accounts, past due payments or a previous bankruptcy, you might want to take some steps to improve your credit before taking out a loan in order to secure a better interest rate. When applying, it is best to have all accounts paid current and a document plan for repaying any collections.
2. Save a Down Payment – Putting some money down on a vehicle’s purchase price can help you get a loan, as it gives your lender confidence that the loan is a good risk and you will be able to repay it.
3. Budget - Before shopping or applying, figure out how much you want to spend and can afford to pay monthly.
4. Estimate Costs - Remember the additional expenses of owning a vehicle (license, registration, taxes, maintenance and fuel). According to the Bureau of Transportation, these ownership costs account for 75% of the total annual cost of owning, operating and maintaining a vehicle.
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5. Shop Insurance - To obtain financing, you will need to have a full coverage auto insurance policy in place.
6. Apply First - Get pre-approved for a certain amount on a vehicle loan by applying with a credit union before shopping. This will give you more leverage to negotiate with dealers.
7. Shop Rates - Talk with your lender about interest rates to find out what you can do or which types of vehicles will qualify you for lower rates.
8. Compare Loan Terms - Play around with different loan amounts and terms in our vehicle loan calculator to get an idea of what loan terms and amount will work for you.
9. Pay Off Quickly - The best car loans for you will always be those with the shortest affordable loan terms. Shorter terms mean less time for interest to accrue and also usually feature lower interest rates than lengthier repayment agreements. Leaving some wiggle room in your budget, however, is advisable.
10. Ask about Early Payment - Vehicle loans sometimes incur penalties for early repayment. This is important to know because it will help you decide whether or not you want to choose a monthly payment amount that is less than what you can afford.
If you are ready to apply for a car loan or would like more information about improving your credit to qualify for better loan terms, contact a representative at America's Credit Union today. We look forward to helping you through the entire process of shopping for a new or used vehicle.
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