You probably want to get the best financing deal possible when you buy a car. After all, saving money is almost always preferable to spending it. That said, not all car loans are created equal. Because of that, it’s essential to do your research before signing any contract — even if it means saying no to that fantastic new set of wheels for a little while longer.
If you’re financing a car and aren’t sure what you should look out for, read on to learn more about car loans and what factors you should consider before signing one.
1. Know Your Loan Terms
One of the most important things you should check during a car loan preapproval is your loan terms. Every lender will have its own set of terms and conditions, so be sure to read the contract carefully before you sign. You should know precisely how much money you’re borrowing, how long you have to repay it, your interest rate, and the total interest you’re paying on the loan.
If you’re unsure of these things, ask your lender to explain them. These terms will likely be the same regardless of which lender you choose, so it’s essential to know exactly what you’re getting yourself into before you sign any contracts. And with that knowledge, you can make an informed decision about what financing options are best for you.
2. Research Your Financing Options
You’ll likely get offered a loan when you shop for a car, but that doesn’t mean you have to take it. Depending on how much you earn and your credit score, you may be eligible for loan options that are better than the one the car dealer offers.
As a general rule of thumb, you should explore your options if you can get a lower interest rate on your loan than what the dealer is offering. You may even want to start your search with online lenders like Lending Tree or Discover Financial. Once you start comparing rates and terms, finding a better deal shouldn’t take long.
While this may not be an option for everyone, it can be a great way to get a low rate and take advantage of a car loan with shorter terms (like three years). You can also check with a family member or friend; you may be able to get a better rate from someone willing to be paid back with interest.
3. Don’t Forget to Check the Fine Print
While you’re reading through the car loan contract, take a moment to scroll through the fine print, too. There may be additional terms and conditions you didn’t notice at first glance, so it’s essential to read everything carefully. If you’re financing the car using your own money, you may be able to negotiate better terms with the lender.
For example, if you can pay off the loan in a shorter period, the interest rate may be lower. If you’re financing the car with a loan from the dealership, however, you may not be able to negotiate a better deal.
4. Check your Credit Report
When you apply for a car loan, your lender will run a report to determine your credit score. They’ll likely pull your credit report, too. While your credit score is an important factor in whether or not you get approved for a loan, your credit report is the deciding factor. Sometimes, lenders will pull a different report than they usually use to determine your credit score.
If they do, you may see information otherwise hidden from view. If you feel like your report may not be accurate, you can pull your report from AnnualCreditReport.com for free at any time. Doing so could help you spot errors that otherwise prevent you from getting a loan.
When it comes to financing a car, it’s important to do your research and know what your options are. That way, you can make an informed decision about which lender you choose and which financing option is best for you. It’s also a good idea to review the loan contract carefully and make sure that everything is in writing. After all, there’s nothing worse than signing a contract and then realizing you missed something.
Author: McKenzie Jones
McKenzie is your typical Midwestern gal. When she is not writing or reading, she can be found training for her next half-marathon, baking something sweet, playing her guitar, or cuddling up with her golden retriever, Cooper. She loves watching football, the fall weather, and long road trips.