Five Simple Rules for Getting a Car Loan

Getting a car loan is a simple process if you follow these rules.

First, never pay more for your car than you need to. Once you find the car you want to buy, go online and find the best possible price for it so your loan will be as low as possible. Get the dealer’s base price and add 5 percent onto it. Be ready to make an offer for that price.

Second, have your down payment ready. Decide how much you are putting into the sale. How much cash can you put into a down payment? Are you trading in your car or selling it? What is it worth? Once you subtract the down payment and trade in value of your car from the cost of the new car, you know how much you need to borrow.

Third, put your credit rating in order. Start by checking your credit rating through your bank or online. If it is not excellent, find out what the problems are. How can you correct them? Can you quickly pay down your credit cards or pay off some of them. Are there mistakes in your record that can be corrected?

Fourth, shop around for the lowest rate. Check around with a variety of lenders (your bank, credit union, online lenders, dealerships) to see who will give you the best possible deal and get a commitment to make the loan. Do not allow each potential lender to check your credit score before making an offer since each check on your rating will actually reduce it. Let them know what your rating is and ask them for their offer in principle. If you accept their offer, they will then check your score.

Fifth, strike while the iron is hot. Timing is everything in buying a car and getting the right loan. Do not act before you have all of your decisions and finances ready. But once you have all your ducks in a row, keep your eye on the markets. If your local dealer is having a sale or interest rates are about to move up or down, be prepared to act quickly and lock in your deal.