- Check your credit rating before visiting a dealership and test driving a new car. Your credit scores play a vital role in the car buying process. And if you have a low or bad score, the lender may deny your loan request or charge a higher interest rate. To avoid this hassle, get a copy of your free report and check the document for reporting errors or unfamiliar accounts. Wrong information on your report can lower your score, and stop you from getting an auto loan. Dispute errors to raise your score; and practice better credit habits such as eliminating debts and paying creditors on time. Ideally, it's best to improve your credit first, and then apply for an auto loan.
- Several lenders will approve your auto loan request without a down payment. But if you have less than ideal credit, or perhaps you want to reduce the amount financed, a down payment can help. Typical down payments for a car loan start at 10 percent of the purchase price. However, lenders are prepared to accept more or less. In addition to approving your chances of getting approved with poor credit, a down payment may persuade an auto lender to lower your interest rate. A decreased interest rate equals lower payments.
- Comparison shopping is crucial with auto loans, and it's the only way to assure the best auto loan deal. Lenders vary. And while one lender may approve your loan and offer a 7% interest rate, another lender may review the same application and offer a 6% interest rate. After deciding to apply for an auto loan, obtain a quote from the dealership's finance company, and then compare this quote with other lenders--perhaps a local bank or credit union. Acquire a minimum of three loan quotes, and compare the loan rate, terms and monthly payment. Read the fine print carefully. And if possible, have an attorney review the documents before making a decision. The best car loan will offer the lowest rate, and the most affordable payment.
