Tips for Applying for Car Finance 

If you are ready to purchase a new vehicle but don’t have all of the money that you need for the vehicle that you want, then an auto loan is a great option for you. Auto loans allow customers to pay for vehicles upfront but also provide them with the ability to pay back the loans every month. There are a few things that you will need to do before you apply for an auto loan.

Boost Your Credit Score

You will want your credit score to be as high as possible before you apply for an auto loan. Customers who have higher credit scores receive better auto loan terms and are less likely to be denied for loans in general. There are a multitude of ways for you to boost your credit score, but you primarily want to remove any derogatories that you have on your credit report and lower the balances that you have on any of your current loans. Check your credit report to determine what your credit score is and the factors that may be damaging your credit score.

Explore Your Options

While you may be tempted to secure the first auto loan that is offered to you, wait and weigh the many options that you have available to you. You can get auto loans from dealerships, banks, credit unions, and many other sources. The best auto loans are loans that have low interest rates. However, a low interest rate still doesn’t mean that the auto loan is good, because lower interest rates are often awarded for loans that have longer terms. For example, 72-month auto loans tend to have lower interest rates than 60-month auto loans. However, you will end up paying more for the vehicle over those additional 12 months due to the additional interest.

Dealerships are not always the best sources for auto loans, as dealerships typically obtain the loans that they offer to customers from other sources. Dealerships make their profits on each auto sale from the differences in interest rates that they have on their loans. The interest rates that dealerships offer to customers are not usually the interest rates that they receive for the original loans. However, dealerships will usually be willing to work with you more if you secure your auto loan through them. If you are a well-qualified customer, then dealerships will also offer better loan terms to you, loan terms that may be highly-competitive to the terms that you can find on your own.

Credit unions are great sources for auto loans. However, to obtain loans from credit unions, you need to be a member of their institutions. Credit unions are smaller financial institutions that are typically local to the areas of their customers. Credit unions make profits off of their transactions and are able to offer low interest rates as a result of these profits.

If you currently bank with a large institution, then your own bank may be a great place for you to get an auto loan. Banks, like credit unions, typically work better with their own customers due to the histories that their customers have with them. Your bank can easily access your account balances and determine your ability to pay back your auto loan. Obtaining an auto loan from your current bank will also make paying off the loan much simpler.

Bring a Downpayment

If you have trouble securing a loan for the vehicle that you want, then providing a downpayment can certainly help you to get the loan. A downpayment is a lump sum of money that you will bring with you when you purchase the vehicle; the amount can be big or small depending on the loan that you are able to secure. Loan providers like to provide loans to customers who have downpayments for their vehicles, because the customers’ investments alleviate the risks of the loan providers. Customers who bring more money into their auto deals will be less likely to default on their loans.

Apply at the Same Time

Every time you apply for an auto loan, an inquiry is reported on your credit report. This inquiry can be a hard inquiry or a soft inquiry, depending on the methods that the loan agency uses. Hard inquiries will decrease your credit score by a few points and stay on your credit report for two years. However, multiple hard inquiries of the same type are usually regarded by credit reporting agencies as a single inquiry if the inquires are made within a two-week timeframe. Therefore, when you apply for auto loans, make sure to apply for the different loans within two weeks of one another. You can then weigh your options and determine which loan suits you the best without worrying about damaging your credit score too much.

Conclusion

Financing is a great way for you to get the vehicle that you want without spending too much upfront. Auto financing allows you to purchase a vehicle without needing to wait until you have all of the funds that are necessary for your purchase. At Jessup Cadillac, we want to help you to get into the vehicle that you desire. We can provide more information to you about auto financing and help you to get a better understanding of the different financing options that you have available to you.

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