Used Car Auto Loans
New, used, certified-Preowned — no matter what kind of car you’re looking to buy there are a set of challenges that come with every car shopping experience. For instance, taking out used car auto loans shouldn’t have to be one of those challenges.
If the idea of finding a lender and securing financing is one that worries or confuses you, then you’ve come to the right place.
Check out these 10 tips to guide you in the right direction:
1. Know Your Finances
Before you step into a dealership you should already know how much you have to spend. Including what condition your credit is in.
Evaluate your budget and determine how much you can afford to put down on your car purchase. In addition, roughly how much you’re willing to spend per month on payments.
You should also have an idea as to where your credit score is and how to interpret your score.
Using a free online service to view your score will prepare you for knowing where you stand before you apply for used car auto loans.
2. Go Rate-Shopping
Just as you aren’t going to purchase the first car that you test-drive, you shouldn’t go with the first loan rate you’re offered.
Shopping around for the best rates and applying to several lenders should be your first step. Finding financing should be top of mind before you begin the process of actually purchasing a car.
3. Choose the Right Lender
The deals offered will vary with the type of lender you take out your used car loan with.
Figure out exactly which type of lender is right for you.
Bigger banks are more likely to cater to those with higher credit scores and typically have more conservative loan practices. Applying for used auto car loans at a big name bank will probably mean facing stricter policies. In fact, you won’t have much wiggle room for your personal needs.
If you happen to be a member of your local credit union, this could be one of the best places to go for used auto car loans.
Because credit unions are non-profit establishments, they are capable of offering their members incredibly competitive loan rates. If you have have a prior relationship with your credit union or loan officer you may receive better offers.
Compare and Decide
It’s always best to compare your options and figure out what is available in your area. Including what works best for your own personal situation.
4. Get Pre-Approved
Go into the purchase of your vehicle with the peace of mind that you know how much you have available to spend.
Knowing how much you’re going to have to pay overtime will help you avoid stress where it isn’t needed.
Pre-approval before you begin shopping will help keep you within your original budget. In addition, there’s less ability to go beyond what you’re already approved to borrow.
5. Keep Time in Mind
Ideally, you want to finance your loan over the shortest amount of time you can afford.
The less time that you spend paying off used car auto loans, the less time your loan accrues interest.
This isn’t to say that you should overwhelm yourself by taking on a loan with terms that are too aggressive for you to pay comfortably. As a matter of fact, be realistic about what you can afford.
6. Be Careful with Credit Checks
Knowing the difference between a soft and a hard pull on your credit and what the lender you’re applying to is using, is important.
Some lenders will only do a soft check on your credit which does not negatively impact your credit score, but also provides the lender with less information.
On the other hand, some lenders will do a hard pull on your credit which produces your full credit score and history. This will lower your credit score and stay on your report for up to two years after it’s done.
Be aware of the type of credit check the lenders are using. This will help to keep the negative marks on your credit to a minimum.
7. Online vs In Person
By browsing online for deals and using an online lender its possible to be more efficient and save money in the long-run.
Learning more about online lenders will be helpful in this decision-making.
8. Don’t Focus on the Monthly Amount
When you’re shopping for your vehicle the salesperson you’re working with will likely ask you how much you want to pay a month. However, it’s important not to focus on the monthly payment amount too much.
If you get too caught up with the monthly payment amount and don’t keep in mind how much you’ll be spending overall, including interest, you may end up shelling out more money than you intended to.
9. Avoid High-Interest Rates
This may seem like a no-brainer, but you’re going to see a range of interest rates. In fact, you’re going to want to select the offer with the lowest rate over the shortest amount of time.
The average interest rate for used car auto loans is 3-5% but can be as low as 2% given a good credit score and the right lender.
If you’re being offered a loan with an interest rate higher than 5% it’s in your best interest to keep searching.
10. Finalize the Deal
To keep yourself from being tricked into a higher price than agreed upon, make sure any deals made in the dealership are finalized before you leave.
Find the Best Used Car Auto Loan
Use these 10 tips and don’t settle until you’ve found the best deal possible for your needs.
To learn more about used car auto loans and other ways to improve your credit intelligence, check out our other blog posts and subscribe to our newsletter today!
For more information about financing, loans, and credit, check out Credit Squared!
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