To make sure you remain in the driver's seat, when securing a loan.....
1. Access your credit score and report. By accessing your credit score and report via the credit reporting agencies, this will not affect your score. If you allow your lenders to access your credit report and score, this could affect your credit score.
2. Review and analyze your credit report for accuracy.
3. If there are inaccurate items on your credit report, this could affect your credit score, the interest rate you’re assigned and/or decrease your chances of being approved for a loan. The higher the credit score, the better chance you have of receiving a lower interest rate.
4. If there is inaccurate information on your credit report, take the appropriate steps provided by the credit reporting source to resolve any concern. Make sure you provide appropriate documentation to resolve your concern.
5. It’s time to go loan shopping! Seek approval for a loan through more than one source. Get pre-approved for a loan via your financial institution and/or credit union prior to purchasing a vehicle. This will save you time and energy from being hassled by the finance department of a dealership. If you’re apart of a church credit union, you may want to accept the rate being provided by the credit union since you’re aiding the growth of your religious institution. You could view this as a form of tithing.
6. If you don't have good credit, consider saving up at least 30% percent of the price of the vehicle in advance of securing a loan. This could place you in a better position of getting a loan and possibly a better rate, too. If you had a vehicle repossessed, this could affect you in securing a loan. You may have to consider buy-here, pay-here dealer or possibly pay cash for an inexpensive vehicle in case you have difficulty securing financing. We'll cover this topic later.
7. Once you have been pre-approved with an interest rate you’re now in a position for the dealership to make finance arrangement for you. See if the dealer is in a position to match or lower your pre-approved rate. If your rate is better than what the dealer offers, stay with your approval source. This same process can be utilized when seeking a home, boat, motorcycle, credit card interest rate or personal loan. Do you know the total cost of the loan and if there is a prepayment penalty for paying off the loan early? Before you accept any loan, make sure the loan amount, the interest rate, the term of the loan and the total cost of the loan is what you agreed to.
8. If you believe the interest rate you have is too high, consider refinancing your loan through a credit union. What do you have to lose? You may find that you’ve saved yourself some money.
9. Read the editor's article "Who Should Provide Your Financing?"
10. Use the car-payment calculator located on this site to estimate your car payment in advance of securing financing. Also locate the average interest rate being offered today, which is also located on this site.
By following the aforementioned steps, this should aid you in avoiding predatory automotive lending practices. Other outside factors that may control your automotive interest rate include but isn’t limited to your work history, income, previous car-payment history and/or the down-payment. A number of car companies offer special interest rates to first time buyers, upcoming and/or recent graduates of a 2-year or 4-year institution of higher learning. These tips should help keep you in the driver’s seat.
If you would like to learn more about credit, click here to visit the MyFICO Credit Education Center.