If you are in the market for a new car do yourself a favor and get pre-approved for your financing before you ever set foot on the dealership lot.
Pre-Approval Gives You an Edge
Getting pre-approved for an automobile loan is not as difficult as it may seem. Most of the steps are exactly the same steps you would take if you were looking to get financed at the dealership, only with pre-approval you will end up with a much better deal that could end up saving you thousands of dollars.
The first thing you need to do is print out a copy of your credit report and check it for errors. Every American citizen is entitled to a free copy of their credit report once per year from each of the three major credit reporting agencies. Be certain you check all three and review them carefully. It is not uncommon for a reporting agency to make mistake. This information is used to determine your credit rating. A low credit rating may make you ineligible for a loan or force you to accept terms which are not very good. If you find an error on your report contact the appropriate reporting agent to request the mistake be corrected.
Determine How Much You Can Afford
Once you know your credit score calculate how much you could afford to spend on a new vehicle, including maintenance, insurance and fuel costs. Take this amount and use one of the many online payment calculators to determine just how much you can afford to pay for a new vehicle. With this information you can start approaching a variety of lenders to see what terms they can arrange for you.
Ask Your Personal Financial Institution
Visit the bank where you deposit your paycheck every week. Banks like to deal with people they know. They already know your financial history, they know what your paychecks are and how much you have to spend based on your transaction history. But don’t stop there.
Check the Local Credit Union
Visit the local credit union in town. Credit unions fared much better during the past global recession and have started offering auto and home loans at reasonable rates to a wider group of customers. If you have a decent credit rating you might be eligible for a low interest automobile loan from a credit union, saving yourself hundreds of dollars.
Try Online Lenders
You can also check online for a pre-approved automobile loan. There are an assortment of online lending institutions with lower overhead than a traditional brick and mortar bank. The money they save by not having a traditional banking facility they offer to their customers in better rates for loans.
Now You Are Ready
Once you have your pre-approved loan in hand you can visit your dealership and choose the car that fits the bill. If you end up with an automobile that is less than what you are pre-approved for don’t spend that extra money, just don’t use it. This will help you keep your payments low and protect your credit rating for future use.