What You Need to Know Before Applying for a Car Loan

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Cars and homes are considered essential assets in today’s world. Cars give individuals independence and homes give security. The fact is, once you buy your car, it will become a part of your life. You will use it to visit the store, go to work, go out on vacations, and so on. However, it’s possible that you may not have sufficient cash to pay upfront. Fortunately, a loan from an auto loans credit union ensures that you don’t burn your pocket while buying your dream car.

But wait, do you know the factors to keep in mind to ensure that your loan process goes smoothly? Here are five things you must know before applying for a car loan.

Check Your Credit Score

When you apply for any loan, your credit score is the most important factor. It determines everything, including your interest rate, loan amount, and the monthly installment.

Here is a reality check. Not all lenders employ or use the same score system. They have various criteria, so the minimum score required to qualify varies depending on the company financing your vehicle.

Moreover, understanding the details of your credit history can also help you get the highest amount of loan and offer the most competitive rates for your car loan.

Request Loans Within 14 Days

Your credit score will partially dip when lenders check your credit history. However, the process of applying within two weeks will lessen the adverse effect. So, ensure that you have your car loan plan in place before visiting the dealer.

The reason for this? Well, the shopping period is 14 days. The credit score fluctuates according to the credit history and the current credit activity. Therefore, all inquiries made during this period are considered one and reduce the impact on your score.

Get Pre-Approved, Then Shop

We’d always recommend walking in the dealership center with a financing deal already in place. An approved offer will ensure that you have enough money to pay the first payment to book a car.

Moreover, planning lets you organize your finances before taking on a car loan. Maybe you don’t have a great credit score, but you can maintain control over the rate of your loan and the amount you pay each month or even negotiate a better rate based on your financial background.

Calculate the Cost Before Saying Yes

While securing finance, you must know about the various aspects that contribute to your monthly car payment. For example, the annual percentage rate (APR) impacts the amount you have to pay every month.

Sales tax also affects the price of the car. So consider tax as part of the total cost of the vehicle when calculating the total for your car loan.

Also, think about the dealer fees that could include the cost and the price of additional features. Make use of loan calculators to do the math.

Understand Dealership Financing

Sometimes, dealership financing can feel attractive. Offerings like zero-interest financing or significant cash-back rebates that ultimately decrease the amount you pay for the loan might seem like the most suitable option.

But, remember that loans are available only to those who have high credit scores. Any negatives in your credit history or poor credit score will likely make you ineligible for financing.

Final Thoughts

We get that you want a car. However, we humans often make rash decisions, which we regret later. A financing plan for your next car is an excellent option for purchasing the car you desire. It can be a bit complex, so bear the above tips in mind before signing any deal.

Good luck!

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