How to Apply for a Car Loan

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Some drivers save money for months or years so that they can pay cash for a new car, but financing the car’s sales price with an auto loan is a more common method. A car loan typically has a term length of three to six or seven years. You understandably need your loan payment to be as affordable as possible. Regardless of whether you are preparing to apply for your first car loan or you simply want to ensure that you get the best deal possible, these important steps can help you to achieve your goal.

Prepare for the Experience
Before formally applying for an auto loan, you should review your credit rating. Understand what your credit scores are so that you have a realistic idea about how competitive your interest rate should be. A lower credit score will yield a higher interest rate. If you identify issues with your credit report, take steps to correct the issues before you apply for a loan. Another important step to take is to use an auto loan calculator online. By doing so, you will have a reasonable idea about the vehicle sales price that may be affordable for your budget.

Shop Around
You may think that most auto lenders offer the same general rate on loans, but the reality is that the difference can be considerable. In addition, lender fees can also vary. The Internet makes it fast and easy to obtain quotes and to compare options before you apply. When you do formally apply for an auto loan, obtain a prequalification or preapproval letter before you visit the dealership. In most cases, you can complete all aspects of the auto loan application process online, and the application can usually be completed within a few minutes.

Get a Dealer’s Quote
Even if you believe that you have completed an exhaustive search of auto loan options and have found the best deal possible, it makes sense to let the dealer’s financing department give you another quote. You can present your prequalification or preapproval letter to the financing department, and these are the terms that you are asking them to beat. In some cases, you may be told immediately that they cannot beat the terms that you have found. In other cases, you may be pleased to learn that the financing department can offer you an even better deal.

Applying for a new car loan can seem stressful at first glance. However, the actual application process only takes a few minutes in most cases. In order to ensure that you set up the most competitive loan terms and that your loan payment is affordable for your budget, walk through each of these steps before you finalize your car buying plans.