Your Credit Score: This is the most important factor in getting good loan terms from the lender. Whether you apply for a loan from a bank, credit union, or dealership, they will check your credit score before lending money. Before you apply, get a copy of your credit report from the three main reporting bureaus for free. Check them carefully, and if there are any mistakes, get them corrected.
Apply for a Loan in a 14-day Window: When lenders check your credit history, your score takes a small hit. It also dips a little when they do a hard pull in case you’re applying for preapproval. While getting preapproved is great, you’ll want to apply with multiple lenders in 14 days because, in that time window, all requests are considered as one request, and it won’t hurt your credit score much.
Get Preapproved Before You Go Shopping: Setting a budget is the most important thing about buying a car. So when you know you will be buying a car, the first thing to do is check financing. Apply to multiple lenders like banks, online lenders, and credit unions and check if you can get preapproved for a loan. That will immediately give you an upper limit about how much you can afford to spend on a car. It also gives you a lot of negotiation power to bring down the overall price of the vehicle at the dealer.
Calculate All Costs: Remember to always negotiate on the car’s full price and not the monthly payment. Then understand all the factors that go into setting that monthly EMI. This includes the total loan amount, whether you have a down payment and how much it is, and the term of the loan. Use an auto loan calculator to play with the numbers, so you find a loan amount and monthly payment amount that’s about 10% of your take-home pay.
Understanding Dealership Financing: Remember that the dealer ads that entice you with 0% financing and large cashback are only available to the customers with impeccable credit history. Always calculate all costs before signing anything. Remember to take your time and don’t be rushed.