4 tips to get the best deal on a car loan

Today, an increasing number of US residents have struggled to pay their monthly auto loan installments. While the numbers are low, they are increasing at a fast rate. However, loan applicants have been experiencing many problems in terms of making monthly payments. This is happening more since the Great Recession.

As a car buyer, you may want to make sure you can afford the loan. The car should be something you can easily afford and it should also fit into your budget. This will keep you out of trouble in most cases. If you want to get the best deal, we suggest you follow the 5 tips below.

1. Check your credit reports

First, you must obtain your credit report from all three bureaus: TransUnion, Equifax, and Experian. Actually, you need to check all three as you have no idea which one your desired lender is going to use. Furthermore, this will also give you enough time to correct your mistakes.

Aside from this, you should check your credit score because your credit score will be used to set the interest rate. If you have a good credit rating, you’ll be able to get a loan at a significantly lower interest rate, and vice versa.

2. Compare prices

We suggest you shop around when looking for the best deal. In the same way, you should look for the best offer when applying for a loan. Most people don’t. Most of them don’t do their homework before going to a dealer.

According to the Center for Responsible Lending, 80% of car buyers make their financing decision at the dealership. It’s probably the convenience or lure of ads offering low interest rates. Keep in mind that you can get the lowest interest rate only if you have very good credit scores.

If you want to get started, we suggest you contact community banks and credit unions. They generally offer the lowest interest rates on auto loans.

3. The shortest loan

Since car prices have risen, car loans are given with higher interest rates so that the entire amount of the car can be paid off in lower monthly installments. So today, you can finance your car for up to 9 years. Monthly payments will be reduced with an increase in the number of installments.

Here’s the kicker: If you choose a higher interest rate and decide to make payments over, say, 5 years, you’ll pay more for the car in the long run than if you’d chosen a shorter payment period. Therefore, you should choose a shorter period for payments, as this will help you get out of the loan faster.

4. The monthly payment

Some people assume that they are ready to continue as long as they can make the monthly payments, but this is not a good assumption. In fact, this is a terrible mistake.

So before you apply for an auto loan, make sure you keep these 4 factors in mind.