The current economy is tough on everyone. Many of us are getting over medical bills, layoffs, and other financial setbacks. And far too many of us are convinced that somehow that means we can’t qualify for an auto loan. But that’s just not true, especially when you use these handy auto loan approval tips.
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Financing First, Car Second
You should have your auto loan in your hand before you step onto a car lot. For many, this seems counterintuitive, but if you approach this as a financial decision instead of setting your heart on a car you may not be able to afford, it’ll make your shopping a lot easier.
Use An Auto Loan Calculator
The first thing you should figure out is what kind of car will fit into your budget. Remember, the monthly payment isn’t just going to be the cost of the car paid over a few years; there’s also interest and fees, both costs you should be aware of when applying for any auto loan. Sit down with an auto loan calculator and your budget and figure out what you can afford. And remember to leave a little room in your budget; if buying a certain type of car means you have to live paycheck to paycheck, it’s not worth borrowing the money to buy it.
Clean Up Your Credit Report
Start with one of the most commonly used tools for assessing your creditworthiness, your credit report. You can request a free copy of your report annually from the three major credit bureaus, and before shopping for a car loan, you should look it over and see if there are any inaccuracies or errors. If so, get those corrected; even just a few extra points on your credit score can make the difference between an interest rate you can afford and one you can’t.
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Make A Point Of Comparison Shopping
Remember, any car loan is a financial product, and all financial products have prices, in this case the interest you’ll pay. The higher the interest rate, the more money your car is ultimately going to cost you. Similarly, the longer you have to pay off your car loan, the more money is coming out of your pocket. So, don’t just go to your bank or the dealership and hope for the best; look for alternative lenders who can help you get the best possible rate.
Another fact many of us forget, especially if we need a car quickly, is that eventually we’re going to have that car loan paid off and we’ll own a car. That doesn’t just mean that you’ll be free and clear of your car payment; it means you’ll have an asset with a tangible worth. So, take a few moments and figure out what your car will be worth when the loan is paid off … and how much you’ll be paying for it in interest. If the two don’t line up well, it may not be the best possible purchase.