Get the Best Pre-Approved Offer
Receiving preapproval for your used car loan is crucial before visiting the dealer.
It’s a beneficial way to understand the terms and conditions you will face based on the cost of a used vehicle. However, being pre-approved is more involved than visiting a lender and asking for a loan.
For the best results, you should analyze your credit rating before meeting with a lender. If you are unsure of your score, submit to receive a free copy. Analyze your documents to ensure it is accurate, as poor marks can make you appear unreliable for financial backing. If you feel there are errors on your credit report, the Federal Trade Commission suggests these steps to find a resolution.
• Tell the credit reporting company in writing about the inaccuracy.
• Dispute the negative remark with the information provider or creditor.
• If it is found to be a genuine error, the provider must tell the credit reporting company to update or delete the item.
Once you understand your credit and establish a reliable score, you should search for a loan from multiple lenders.
Consider the Annual Percentage Rate
When acquiring an auto loan, one of the most significant considerations to make is the annual percentage rating, or APR. This percentage will deem the amount of interest you will pay over your term. When you find a lender who offers a low APR, your responsibility for interest is limited, making it easier to pay more each month and lower the principle amount.
The Monthly Payment
While you shouldn’t make a purchase based on the monthly payment alone, it is a good practice to ensure you can afford it comfortably. Keep in mind, a vehicle purchase features many more expenses than your monthly responsibility.
You should also leave space in your budget to cover maintenance fees, repairs and fuel costs.
The Length of a Loan
According to the United States Federal Reserve System, in
2017, the average car loan was for 69 months and $30,294. While a used car may not be quite as expensive, you should still consider how long you want to make payments. Many lenders will give you options on how long the loan will extend.