You’re in the market for a new car, or at least a car that’s new for you. You’ve visited several car lots and you have an idea of the type of model you want, what features you’re looking for and what you’re willing to pay. But you’re not entirely sure about how to finance the purchase. Actually, getting a good rate for an auto loan is easier than you might think, but it involves advance preparation and putting in some legwork.
Check Your Credit
You may be familiar with Equifax, Experian and TransUnion, as well as FICO, but what you may not realize is that auto loans are often based on a unique auto credit score called the Auto Industry Option Score, also known as an auto score. Your auto score is weighted heavily on how you handle auto related credit rather than your overall credit history. If you’ve kept up your car payments in the past, you likely have a decent auto score, even if your overall credit is questionable.
The bad news is that unlike your regular FICO score, your auto credit score isn’t readily available, although there are services that provide your auto credit score along with your regular FICO score if you pay a fee to become a member. If you don’t want to pay money, request a copy of your credit report. Look for items related to previous car financing. You won’t be able to calculate an actual auto score, but you will be able to get a rough idea of whether your auto score is good, fair or bad.
Secure Financing First
If you belong to a credit union, make it one of your first stops to secure financing. Especially if you have good credit, you may be able to get a much lower interest rate than the dealer could offer you. Your employer or insurance company may also be able to finance your purchase at a decent interest rate.
No matter if you have good, iffy or even bad credit, shop around. If your auto credit score is better than your regular FICO score, concentrate on lenders that base their decisions on your auto score. If your regular credit score is better than your auto score, go with lenders that weigh FICO scores more heavily. In either case, if you show the dealer that you’re already approved for a loan, you have more leverage in the negotiation process
If your credit is damaged, you may be tempted to go through a buy here, pay here car lot to get approved. But interest rates for these loans are sky high, and some lenders will repossess your car if you’re even one day late with a payment. A better strategy is to schedule an appointment with a lender and provide an explanation for negative credit items. If your banker knows you lost your job two years ago but you’re back on your feet now, he or she may approve your loan and give you a break on the interest rate.
By paying off your car in 36 months rather than 48 or 60 months, you can often score a lower interest rate. Even with higher monthly payments, you’ll still save money on the total purchase price of the car. On the other hand, if you can only afford the monthly payments on a car with a 72 or 84 month loan; you should look for a cheaper car.
See http://logbookloanfinance.co.uk for what type of loans to avoid.
Are you looking to buy a property or even an automobile and need to calculate loan repayment in advance to find out how much you can afford to borrow? Well the good news is that there are numerous loan calculators available online and most are free to use.