Car loans: everything you need to know

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Getting a loan is one the most important steps on the way to getting the car you were dreaming about. When you go ahead, you have already made up your mind about what exact car you want to get and what are the technical features which you need first of all. You have already figured out the price of the car. You either get a brand-new vehicle or you can buy a used car here. The latter will help you to get a fancier car for a lower price.

Either way the chance that you need to take a loan to buy the car that you want is quite high. Getting a car loan might be as tricky as finding the car itself. Here’s how you get your car loan and what you should keep in mind while choosing one.

Check your credit score

Your loan record will determine the amount of money you can borrow and the interest rate. It is very important to have a good record before you apply for a car loan. Check your record in advance and make sure that it qualifies you for the loan that you need. If something is wrong you can file a dispute, and you should apply for a loan only when the issue is solved. If your credit score is not good enough you should consider spending more time on improving your credit score. Even if it takes half a year, it will help you a lot.

Compare different lenders

There are different institutions which can lend you a car loan, and it’s easy to get confused by numerous offers. These can be big national banks or local community credit unions. Also, there are online lenders who work specifically with car loans. Finally, you can get a loan from the dealer which is selling the car. Carefully check their interest rates and other conditions before you make up your mind. Even if the dealer is offering a good loan, you can also get generous conditions from your bank. If you are going to buy the car from a private party, make sure that the potential lender does not mind.

Submit your application for the loan

When you have chosen the lender or the possible lenders the whole process only begins. They will consider your application, and it will have to go through several stages. Upon checking the credit score that you provided the lender will decide about pre-qualification. At this point you get a general assessment of the amount of money you can borrow and the interest rate. Once you are done with this stage you will have to provide a more extensive credit record and more personal information. Based on these data the lender will pre-approve your loan and will give you precise information about the interest rate and the amount of your loan.

Check the loan offer from the dealer

As we mentioned before, car dealers often have their own lending business. It makes sense to check your dealer’s rates after you have been pre-approved. If your loan was preapproved with a particular rate the dealer might try to win you over by offering you a lower rate. Do not refuse too soon and check what they can offer. You let them know that you want to stick to the pre-approved loan at any moment.

Read carefully and check the details

If you decide to take the dealer’s loan you should pay attention to a couple of details in the contract. A better interest rate often comes at a cost. Make sure that the contract does not include any hidden fees which you did not negotiate. Check the loan term, as the longer you pay off, the more you have to pay for the interest rate. Make sure you do not pay for the extras you did not ask for, as dealers often add different kinds of insurance into the contract. Check if there is no penalty for an earlier pay off. It is not a very common thing, but it’s always good to check twice.

Final words

When you’ve gone through the labyrinth of banks and paperwork make sure you pay off the loan on time and enjoy driving the car of your dreams.

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