How to Get a Car Loan

Transportation is a necessity, and obtaining a car can be an intimidating for buyers. The car loan process can seem confusing and many consumers have a hard time comparing financing offers in order to get the best rates. There are several types of car loans to choose from, and being able to make an informed decision is key to getting the best deal.

The car loan process is often not started until a buyer has chosen a vehicle and is ready to buy. To the contrary, the process should begin before ever setting foot on the car lot, getting a pre-approval and shopping around for the best deals. Going to rate comparison websites and calling around to local banks should narrow down car loan choices. However, if buying a new car, never overlook the dealership altogether in financing. They will often provide incentive purchase rates, sometimes as low as 0% for sixty months, which is better than any bank will do. If you choose to get a car loan through the dealership’s financing institution, be careful of any additional fees that they want to tack on, often in the form of extra warranties or buyer protection.

The car loan process begins with a buyer and optional co-buyer providing background information, including yearly income, social security number, and proof of identification. The social security number will be used to obtain a copy of your credit report and credit score. The credit score is the number that is used to decide on the interest rate that the buyer will pay on his or her loan. The higher the credit score, the better the interest rate will be.

Be prepared to offer a down payment. The higher the down payment is, the more likely the buyer is to be approved for a loan. Also, because car values depreciate up to seventy percent over the life of a loan, these down payments can keep the owner from becoming up-side down in the car loan. Being up-side down in a loan means that the value of the car is less than the balance on the loan, a position no buyer wants to be in.

Be careful with car loans that charge an early payoff fee. There are many financing banks and companies that will not charge an early payoff fee, and still offer competitive rates to their customers. Also, read all of the fine print in the contract. Penalties and charges can be incurred on late payments and loan defaults. These penalties can really add up, so shop around to see whose are the lowest.