Taking out a car loan is usually a straightforward process, one you can complete in anywhere between a few hours to a few days, depending on lender requirements. Before you visit a dealership and find yourself signing loan paperwork, learn about the best financing option for a car loan, as well as the details that could possibly help you get a better deal.
Car Financing
To get financing to purchase a car, you must have an acceptable credit score, history, debt and income. Even though the loan is secured by an asset (the car), the lender still wants assurance that you'll repay the loan on time and in full. The minimum credit score for getting a car loan is about 620, but varies depending on the lender and lending program.
Credit Union Loan
Many car dealerships who broker car financing agreements will inform you that credit unions are the best financing option for a car loan. Credit unions are non-profit organizations, which mean that they don't have the same for-profit motives as banks. So credit unions often charge lower car loan interest rates compared to other financing options. You may have to open an account with the credit union in order to apply for or finalize the loan. The average rates at credit unions were between 1 and 1.5 percent less than bank rates, as of 2009.
Online Search
To find the best possible deal for your proposed car loan, apply for the loan using an online loan application website that includes credit union quotes. These websites send your information to a number of lenders so that you can receive more than one quote back from one application. It saves time, and ensures that you get an accurate idea of the best rates you qualify for when buying your new car.
Additional Tips
You can also improve your chances of finding the best possible car loan terms by agreeing to put a larger down payment on the car. The larger your down payment, the less of a risk lenders associate with the car loan, and the lower the rate, in some cases. Also, in advance of visiting the dealership or searching for a credit union loan, check your own credit history and score to see if you can make improvements.
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