Buying a new car should be easy. A would-be buyer looks over the vehicles within his/her budget and makes a selection. Those unable to pay in cash opt to finance the vehicle. Financing requires little more than being approved for an auto loan. Being approved for “any” car loan doesn’t always create a preferable situation, though. A borrower’s financial interests are best served when the loan comes with great terms and interest rates.
There’s a basic truth when it comes to borrowing money to buy a car. The quicker you pay off the loan, the cheaper the car becomes. Dragging out a loan payment leads to paying more interest. Unfortunately, when the loan interest rate is high, paying off the loan balance becomes tough. Sure, refinancing remains an option. Why go through that process when you could simply get the best possible loan deal from the start? Following a few standard tips could help with getting a truly great car loan.
1- Keep Track of All Those Pre-Approvals
Have you been receiving pre-approval offers for car loans recently? If so, then you may be in a great position to negotiate an even better car loan with a potential lender. Pre-approvals are considered “soft” approvals. Someone pre-approved for a $14,000 car loan still needs to go through the formal process of being approved. However, the lender has looked at some basic information and determined the borrower would make a good prospect. So, enticing loan offers with low rates of interest go out in the mail.
Again, these offers can be used as leverage. Maybe you have been doing business with a particular credit union for 10 years. You trust the credit union and would like to take advantage of a 3.1% loan offer. A completely new bank is willing to approve a loan at 3.0%. You could inform the credit union of the 3.0% deal and see if they would be willing to match it. If so, then you get a great rate along with the ability to continue doing business with a lender you greatly trust.
2- Read the Terms Closely
The terms and conditions associated with the loan should never be taken for granted. The second you sign your name to the loan contract. Not all terms reflect the most favorable conditions for the loan. An “early payment” penalty might be in effect. With this term, paying off a three-year loan at the two-year mark could require an additional fee to cover the lender’s interest loss. Not reading the fine print on the loan contract might lead to an unpleasant surprise when choosing to pay off the loan early.
The terms and conditions associated with a loan contract aren’t filler items added to take up paper. They reflect binding conditions associated with taking out the loan. Read all line items and terms in the contract. Doing so makes smart business sense since you don’t want to sign a loan that turns out to be an undesirable one.
3- Work on Improving Your Credit Score
The receipt of a good interest rate often rests on how good your credit score is. A weak credit score leads to equally weak loan interest rates. Fair credit won’t exactly lead to many pre-approval offers. Bad credit almost forces a borrower to work with a sub-prime lender. Any lender willing to work with a high-risk borrower has to charge excessive interest rates. A borrow may get a loan approval, but the cost of loan can be tremendous.
To improve the chances of getting a great loan offer, borrowers should work hard at improving their credit score. Improving a score can be done immediately. With the right effort over a consistent period of time, a credit score may climb upwards relatively quickly. Cutting back on unnecessary spending and paying down debts over the course of a year could lead to a great loan offer. For those unable to avoid accepting a sub-prime auto loan, work on fixing your credit and then see what refinancing options exist.