Car Loan Tips Every Borrower Should Know

If you’re planning to buy a car, odds are you’re also thinking about auto loans. And while most dealerships offer financing options, there are benefits to applying for a loan with your bank or credit union first so that you can go into the dealership with a loan pre-approval in hand. Plus, checking rates at your financial institution won’t affect your credit score since it’s considered a soft inquiry. Here are some smart and effective tips to help you find the best car loan for you:

Check your credit score

Your credit score can, in fact, affect how much interest you might pay for a loan. That’s why it’s crucial that you know exactly what it is. A good way to see where you stand is by ordering a free copy of your credit report from a credit bureau. Once every 12 months, each of the three major credit-reporting agencies must provide you with a copy of your report for free. If your credit score is less-than-impressive, it’s best you work on improving it before you apply for an auto loan.

Look for a short-term loan

Short-term car loans often have interest rates that are a little lower than longer repayments, and you’ll have the added bonus of owning your car sooner and paying less interest overall. A shorter term also means a larger monthly payment. If you can’t comfortably include this in your budget, there are a few things you might want to consider: adjusting your budget to fit the higher payment for the shorter loan; waiting until you can afford to put more money down so that the monthly payments will be lower; or buying a less expensive vehicle.

Make a large down payment

Make a large down payment, and you’ll enjoy lower monthly auto loan payments. You’re also more likely to get a better interest rate. In general, the more cash you put down upfront, the less you can expect to pay in monthly loan payments. So, if you don’t need to purchase a vehicle right away, it can help to save up more money for the down payment.