5 Steps for Getting an Auto LoanWritten by Carly Simon-Gersuk
You are in the market for a car, but unless you have saved a lot of money you will need to borrow some money to get your car. Do not worry, buying a car is not a complicated process. We are here to make it easy for you as well. Here are five steps you need to know and take for getting an auto loan.
1. Check your credit
First, you need to check your credit report. You can do so with a soft credit pull from either your bank or various online sources, such as Experian and Credit Karma. These credit reports are free of charge and do not damage your credit score. Examine your credit report to check for any errors or inaccuracies, and if something is wrong get it corrected as soon as possible. If there are no problems, assess your score to see if you need to postpone applying for a loan to improve your credit thus improving your odds of getting a loan.
Remember, the better your credit is the cheaper it is to borrow money and secure an auto loan. This means that with a higher credit score you are more likely to get a lower interest rate, and may qualify for lower insurance premiums too. On the contrary, a lower credit score does not necessarily prevent you from getting an auto loan, but it can raise your interest rate.
2. Build and understand your budget
Having a budget and knowing how much of a car payment you can afford is essential. You need to make sure your loan payments will fit your monthly budget and long-term financial goals. This means you need to determine how much you can comfortably afford to pay each month toward your auto loan, how large of a down payment you can make, and how long you are aiming to repay the loan. Once you understand these figures, you can estimate and adjust your budget accordingly to ensure your monthly payments and ability to put away savings.
Additionally, take into consideration taxes and insurance. If you are not already budgeting monthly for auto insurance you will need to factor in that additional monthly payment, as well as the annual registration fees.
3. Know what you can afford
With your budget on hand, you can figure out how much you can afford monthly on your auto loan payments. According to Credit.com, for many a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. For example, if you make $60,000 after taxes a year, then you should not spend more than $500 a month on car payments. Although, depending on your budget, you may need lower payments.
4. Research finances option and get approved
To help you determine what you can afford, make sure you shop around and research options. A buyer can obtain a loan from his/her bank, credit union or the automotive dealership where the car is being bought. By looking into potential loans and comparing the terms, lengths of time, and interest rates, you can find the best and right deal for you and get pre-approved. Once you get pre-approved know that it only lasts for a certain amount of time, so make sure you’re ready to shop for your car and sign before it expires.
Shopping for the best rate also puts you in a stronger negotiating position, which can save you money over the life of your loan. Also consider refinancing your car loan if you already have one. Refinancing may lower your monthly payments and save you money too.
5. Go to the dealership
Now that you have the best loan for you, it is time to shop for your car! Research cars that are reliable and fit your budget. You may have to look at a few different dealerships to find what you are looking for, whether that is one that accepts your loan or has the make/model you want.
Now that you understand the 5 steps you need to take for getting an auto loan, let’s take a quick look at how MoveCU has simplified this process for you. Once you have checked your credit, built a budget and know what you can afford, our system will compare and show you what auto loans you pre-qualify from various credit unions. You then select the one that is best for you and your information is automatically sent to that credit union and huzzah, they will process your loan! So all that is left for you is to go to the dealership and sign on the dotted line.
Written by Carly Simon-Gersuk