Are you considering buying a car on a loan? If you’ve never applied for an auto loan before, knowing how to start the process can really help. That’s why we’ve put together a step-by-step guide to help you get started.
Check Your Credit Score
To get an auto loan at a competitive rate, you’ll need to have a good credit score. So, before you start shopping around for auto loans, make sure to first get a copy of your credit report and check your credit score.
Apply to Multiple Lenders
Next, research loans offered by different lenders. Make sure to check things like the maximum loan amount that is offered, rate of interest charged, loan term, prepayment charges, etc.
Get Pre-Approval
Once you’ve shortlisted a few loans, you can apply for pre-approval to know the exact rate of interest that you will be charged. Consider applying to at least 3 lenders so you can compare the loan offers you receive and choose the most competitive loan.
Work out The Budget
Once you receive your loan offer, you can set your budget. It’s also a good idea to use an auto loan calculator to check the monthly payments. Keep in mind that the pre-approval offer is just the upper limit – you’ll need to make sure that the monthly payments are affordable for you.
Look for Cars
Now that you have a few financing offers in hand and have your budget figured out, you can start looking for a car.
Compare Your Loan Offers with The Dealer’s Offer
If you are buying your car from a dealership, it’s likely that the dealer will have a loan offer for you as well. While you don’t have to take this up, you could use the current offers you have to negotiate for a better rate from the dealer for their loan.
Finalize the Loan
Once you’ve decided which loan you’d like to proceed with, you can complete the application process by submitting any further documents that the lender requires. Before signing the contract, make sure to look for things like hidden fees, early payoff charges, etc. Only proceed with the application if the loan offer is favorable.
After you’ve completed the loan process and purchased your car, it’s a good idea to automate the monthly payments, so you don’t miss any payments accidentally.
