Start by checking your credit and comparing loan offers before you head off to the dealership to get the best auto loan. Let’s understand the process a little more in detail.
Check Credit Report
Call for your annual free credit report from each of the major reporting bureaus. Check them carefully and get any mistakes fixed. If your credit is below 600, ideally, spend some time improving it before you apply for a loan. You’ll get better rates.
Apply with Multiple Lenders
Once you’re ready, contact large national banks, local community banks, credit unions, and online lenders and apply for a loan with each of them. Share all the details they ask for, and compare their offers. Calculate the total cost.
Get Preapproved for An Auto Loan
After narrowing down to a few lenders, get them to compete in order to give you the best rates. Once you find lenders you’re comfortable with, apply with them for preapproval in the same two-week window. They’ll send you an offer letter with details about how much you can borrow at what rate.
Use the Offer to Set a Budget
Use this offer to work out if you want to borrow less because you need to be able to afford it. You also have to pay for taxes, fees, add-ons, insurance, maintenance, and fuel. Work out your budget accordingly and stick to it.
Find a Car
Now, use your budget and your needs to find a vehicle that suits you. Ensure you check the loan offer terms and conditions for excluded brands, dealership requirements, time restrictions, and other details for the loan offer to be valid.
Check the Dealer’s Offer
Once you go through all the car searching and testing steps, ask the dealer for their financing offer. Don’t discuss monthly payments with them, only the total cost of the car. Tell them you’re preapproved and a cash buyer. If they want, they can try and beat your existing offer, or you can use what you have on hand.
Choose and Finalize Your Loan
Check all the fine print carefully, and finalize the loan. Ensure there are no hidden fees, longer terms, unwanted add-ons, and an early payoff penalty in the loan offer.
