You can save thousands over the term of your car loan by choosing a lender with a low interest rate. Banks use a variety of information to decide your rate. You can determine your rate by applying for a preapproval before choosing a car. Consider the various auto loan providers from which you can choose and which information is used to determine your loan status.
Your Credit History
Auto financing companies use your credit report to determine whether to extend a loan and how much of the vehicle's value to offer. Lenders also adjust your monthly term, down payment requirement and interest rate according to your credit standing. Before you apply for an auto loan, check your credit to make sure your accounts are correctly reported to the credit bureaus. Annual Credit Report offers consumers one free credit report per year from Experian, TransUnion and Equifax. Review your credit and correct any inaccuracies before you apply for a loan.
Factors Affecting Loan Terms
Auto loan providers base your lending percentage on the car's value and your credit. With excellent credit, you may borrow up to 120 percent of the vehicle's bank-determined value; with poor credit, this amount could drop to as low as 60 percent. You may need to provide a down payment for this reason. Your maximum monthly loan payment may also be limited based on your debt-to-income ratio. Your lender decides how much of a car payment you can afford by reviewing your monthly debts (listed on your credit report) and your gross annual income, which you'll prove by providing a recent pay stub. The lender may restrict the total amount of your loan to suit your debt-to-income ratio, so you may have to shop for a lower-priced car or provide a down payment.
Rate Comparisons
Compare rates before applying for your car loan. Manufacturers may offer low rates for new cars, although you'll have to apply to the manufacturer's lender. Credit unions offer low rates for new and used cars. Check websites to view rates of banks in your area or research online lenders, such as Capital One, Road Loans or Americredit. Car dealerships also provide car loans to buyers; many use a mixture of local and nationally-based lenders. Call different lenders to determine interest rates if you don't see the information online.
Preapprovals
Once you determine which lender to use for your auto loan, obtain a preapproval. A preapproval can take up to a week's time, so applying for one before you shop can quicken the buying process once you find the car you want. Additionally, you can use your preapproved interest rate to determine your price range, allowing you to shop within your means. Once preapproved, your lending representative can go over your term options and down payment requirements, if any exist. If you plan to purchase from a dealer, bring your preapproval with you and allow the dealer to beat your rate, if possible.
0 comments:
Post a Comment