Getting a good deal on a used car auto loan an take a little work. The first thing you really want to do, if even remotely possible, is to work on improving your credit score. That means planning ahead. Try to start right now if you know that that old clunker you’ve been driving probably won’t make it through the winter. In many cases you can improve your credit score enough in just a few months to qualify for a much better interest rate and greatly increase your chances of being approved in the first place.
First make sure your credit report doesn’t have any mistakes on it. If you do find mistakes immediately contact the company and request they be removed. Take time to include any documentation that will prove what you say and that the item is an error.
No matter how good or bad your credit score may be you can almost always save on interest if you just take some time to shop around. You’d be surprised at the difference in rates between one lender and another.
You can very often get a better rate from a bank online than at your local branch bank. This isn’t a hard and fast rule, but it does happen so it’s well worth your while to compare rates from many different lenders.
You will have some flexibility in the length of the loan. The longer the term of the loan the more you’ll have to pay in interest, no matter what your rate is. on the other hand, the longer the term of the loan the less your monthly payments will be. It’s definitely a trade off. For many people with challenged credit, who are going to have a higher interest rate, it might make sense to get a longer term since that will allow them to afford more car for their monthly payment.
It works like this, if you have a high interest rate because your credit is bad, you will pay more of your monthly payment towards interest. That means the actual amount that goes to the principal of the car loan will be less. If you can spread this out longer, it will allow you to keep your payments lower and still put more towards the principal of the car loan (translation: you’ll be able to spend more on the price of the car which means you can get a nicer car).
Make sure that when you get your loan that you take all you monthly expenses into consideration. It’s not just about what you can afford to pay for your auto loan but also how much your insurance and maintenance costs will be too.
Getting a used car auto loan in today’s tricky economic environment will require you to be patient and do your homework. This is even more true if you have poor or average credit. When looking for the best combination of rates and term possible don’t limit yourself to only your hometown bank, try the banks online too.