Getting Approved at the Best Rates for a Car Loan
When you want, or need a new car, you want your financing to be handled as smoothly as possible so you can get behind the wheel. But, be aware there are some things that could inadvertently hurt your chances of getting approved at the best rates.
Here are five things to do, and not do, when you are applying for auto financing:
1. Don’t have your credit report pulled until you’re ready to buy
Control when your credit report is pulled. While multiple reports for your credit report from auto lenders in a short period of time are generally treated as one inquiry, if you are slow to make a decision, you could run into trouble by having a lender pull your credit early on in the process and then looking at other lenders several weeks or months later. Only have your credit report pulled when you are sure you are ready to apply for financing.
2. Beware of add-ons
If you are getting dealer financing, be aware that the dealer will likely try to roll add-ons into your new car loan such as undercoating, warranties, or credit life insurance. These are all optional and may not make sense for your loan or your new car purchase. Know that you have the right to say no to add-ons.
3. Try to Avoid Rolling Negative Equity into Your New Loan
Think twice before rolling your negative equity into a new loan. If you still owe money on your existing auto loan and your lender offers to roll it into your new loan, think carefully before agreeing to take out that new loan. This can create a vicious cycle and could put you in a situation where you cannot afford your car payments.
4. Consider total cost and monthly payment
When you are figuring out how much car you can buy, look at it both in terms of price and monthly payment. While you may be able to get a $15,000 car and a $25,000 car for similar monthly payments, you will be paying a lot longer on the $25,000 car which means you are paying more interest over the life of the loan.
5. Improve your credit score before you buy
Don’t let yourself be surprised by your credit score when you are sitting at the dealership or at your bank. Your credit score is one of the most important factors in determining whether your loan will be approved, and at what terms. Always check your credit report and credit score yourself before applying for a loan. This will give you an opportunity to clean up any potential errors and to improve your score.
Get the best rates on your auto loan
While buying a car can be exciting, make sure you approach the financing process carefully and educate yourself in advance, so you can get the financing that works best for you. Contact Build My Scores today to schedule a free consultation. We can help improve your credit score as well as offer guidance and counsel about auto financing.