Thinking Of Getting An Auto Loan? Here’s What You Should Know First

If you’re going to buy a car, you need to get multiple things right before you can consider it to be a successful purchase. You need to make sure you get a good price, the most ideal car for your situation, and of course, a way to make the purchase that suits you. Many people choose to borrow for their purchase, but if you’re going to do this then you need to treat the choices you make regarding this with the car and attention that they deserve.

An auto loan can help you to go home with a car that you wouldn’t be able to purchase if you were buying with cash. Unless you have a lot of money saved up, you’ll probably borrow the money and pay off your car with a payment each month. There are two main benefits if you’re careful about borrowing; one is that you’ll spend less on your vehicle, and another is that you have the option to change vehicles within a few years which leaves you with cash free to fund other goals.

If you think you’ll need to take out a loan to get your car, you’ll need to plan the loan way before you start looking car cars. Having everything in order before you do this is a must and will improve the chance that you’ll get a loan and a vehicle that suits your lifestyle. When it’s time to strike a deal and sign on the bottom line, you’ll then be able to do so with confidence.


What are the keys to getting a great auto loan? What do you need to remember? Read on if this is something you’re thinking about…

Managing Your Credit

The state of your credit, along with your income, affects what type of auto loan you can take out. You might not get approved for a loan at all if your credit is terrible. You may have a damaged credit score if you borrowed money in the past and then struggled to repay the loan on time. A good credit score means enjoying a low interest rate, so you’ll pay less for your vehicle over time.

You can check your credit report before you head to a dealership so you know what you’re working with. You can also work on improving it if you need to. If you work on improving your credit before you even set foot in a dealership, you can guarantee that you’ll get a great deal.

How Much Can You Spend?
Before you go shopping for cars, you need to have a clear idea of how much you actually have to spend. Make sure you consider both your down payments and your monthly payments before you start looking at cars. You should never waltz into a dealership without a good idea of how much you have to spend, because if a salesperson sees that you’ve fallen in love with a vehicle, they may make it seem more affordable with fancy maths and longer term loans. In reality, you’ll end up resenting the purchase as you’ll struggle more than you need to. The more down payment you can make, the smaller your monthly payments will be. They should be at a comfortable level for you, because you’ll be paying them off for years. Spending as much as you can afford could leave your future at risk, especially if you start earning less money or you have an emergency that requires you to pay out.

Looking At The Bigger Picture

When you know how auto loans work, you’re going to be much better equipped to make smart decisions about what loan you should take out. You don’t want to end up going for a car with fancy features that you can’t afford. Don’t just focus on the monthly payment when you’re considering how much you can afford. When you stretch out payments over a longer period of time you’ll feel like you’re paying less, but you’ll be paying so much more in interest costs. In general, it’s best to put a downpayment down of around 20%, and make sure your loan spans 5 years or less so that you don’t end up paying more than the car is actually worth.

Shopping Around For The Best Deal

You don’t have to get your loan from a dealership. You may be able to get a better deal from your bank, online lenders, or somewhere else. Consult with alternate lenders before you decide where to get your loan. If you have a few more quotes under your belt, you also have bargaining power. Of course, sometimes the dealers offer just can’t be beat. You can get an idea of prices on sites like Know how much you want to pay, get multiple quotes, and then use that to your advantage.

Flexibility Is Key

Your auto loan should be flexible – find a lender that will allow you to make extra payments or pay off the loan altogether without giving you extra charges and fees to contend with. The fine print will say whether you will be subject to penalties, but the wording may be clever so that you don’t realize that’s what they are.

Thinking About Your Insurance

Lenders will sometimes inquire about life and disability insurance when you go to buy a car. They don’t do this because they genuinely care – they want you to purchase even more insurance with the loan. It’s rare a good deal to get credit insurance with a lender, so bear that in mind when they try to sweet talk you into taking it out. If you do need coverage, then compare from different sources before agreeing to get it with your lender. Keep your loved ones best interests in mind.

Before you go shopping for a car, you need to keep all of this in mind and have as much information available as you can so you leave with the best deal. Don’t get too attached to a car until you’ve done the math!