Car Loan Tips

Assess Your Budget

It's important to know how much used car loan you can afford before you sign the papers, or even before you fall in love with a must have car.  By being clear on how much you can afford to pay monthly, you're less likely to fall into a poorly constructed loan, or borrow more than you can afford to in the first place.  While it's easy to get talked into spending just a little bit more than originally planned, that "little bit" can wreak havoc on your budget when combined with rising gas prices, maintenance, and insurance costs.  Determine the amount you can afford to borrow and then stick with that amount.  You may find it useful to use an online used car loan calculator as you plan for this purchase.  You can access such a calculator by visiting the following link: http://www.edmunds.com/car-loans/.  In addition, you'll find this website to be a great source of car buying tips as well.

Check Your Credit Report

One of the best things you can do to ensure you will qualify for attractive used car loan rates is to get a copy of your credit report before you go car shopping.  For one thing, every time someone accesses your credit report, your credit score goes down a few points, so you don't want multiple car dealerships or lenders accessing your credit report to see what kind of deal you can get.  Instead, procure a copy yourself and ask potential lenders what they can do for you based on the information contained in that report.  When it comes time to get serious about the financing, the car dealership or lender will pull their own copy of your credit report, but this practice will prevent your credit report from being run several times.

Another good reason to obtain a copy of your credit report before you go car shopping is so you can verify the information contained in the report and correct any mistakes before you shop for a used car loan.  This will also give you a chance to assess your own credit worthiness, pay off old debts, and work to raise your credit score if needed.  In addition, you should obtain your credit report from all three credit reporting agencies because one report may contain something that another report doesn't, and you need to get the full picture to qualify for the lowest used car loan rates.  You can get a free copy of your credit report at http://www.annualcreditreport.com.  Be aware that this is the website authorized by the three credit reporting agencies to provide you a free credit report without having to purchase anything or sign up for anything.  Unfortunately, consumers often fall victim to what they think is a free credit report site only to discover later that they were charged for something they did not intend to purchase.

Shop Around

Not only should you shop around for just the right vehicle, but you should also shop around for the right financing.  In fact, it is wise to secure your used car loan before you go shopping for the car.  This way, you can focus on negotiating the price of the car with the car salesperson, secure in the knowledge that your financing is intact.  Once you assess your needs and your budget, you can get a good idea of what your payments will be using a used car loan calculator and experimenting with different interest rates.  You may also find that you have more bargaining power by shopping around for used car loan rates.

Steer Clear Of The Upside Down Situation

You may already be aware of what it means to be "upside down" on your car loan, but here is a brief overview just in case.  Being "upside down" on your car loan means that you owe more than the car is worth.  This is a very precarious situation to be in and can hurt you when it comes time to sell or trade in your car.  This happens sometimes when people buy cars without a down payment or purchase cars with high used car loan rates.  This is not a good situation to be in, so be sure that you are not paying more for a car than it is worth.  In fact, you should always look up the value of a used car before you make the purchase, as this is another great tool to help you through the process.  You can access used car values at the Kelley Blue Book website by visiting http://www.kbb.com.

Stay Focused When Signing The Contract

You want to pay careful attention to the contract you are signing whether or not you finance your car with the car dealer, but especially if you do so, you will understand exactly what you are paying for and that there is no chance of hidden charges sneaking into your car-buying contract.  Often, car purchasers are so worn out by the time they actually make it into the finance office at the dealership that they just want to get the whole process over with and blindly sign whatever papers are put in front of them.  However, this is not a good idea and could hurt you in the long run and inflate the cost of your used car loan.

Sometimes, the salesperson promises you a certain payment based on an interest rate that he or she thinks they can get for you.  You sign the contract thinking your payment is locked in stone, but a few days later you get a phone call saying they could not obtain the interest rate promised, and you discover that your payment just jumped $50 a month.  This practice isn't necessarily a scam, but you can avoid it altogether by insisting that everything the salesperson or finance manager promises you is included in the contract.  This way, you can be sure that the payment you agreed on will be the one you make each month.  While it is still advisable to obtain your own financing prior to going car shopping, it pays to be vigilant if you do go with dealer financing.