Before any major purchase, it’s important to do some research to make sure you stay within your budget and get the most for your money… and cars are no exception. A new vehicle is a large expense and requires some planning. This is especially true if you choose to secure an auto loan to make it more affordable. Here are some steps you should take before you finance an auto loan.
1) Request your credit reports and score
Before you start shopping for a car, get a free copy of your credit report. Your credit report is an overview of your credit history, so it reflects your overall financial health. You’re entitled to one free credit report from each, Transunion, Experian and Equifax, every 12 months. The report will list any credit accounts you have and will show if your accounts are up to date or if you’ve fallen behind on payments.
You can also get your credit score to see a numerical summary of your creditworthiness. Lenders use this information to determine whether or not they should approve you for a new line of credit, whether it’s a credit card, auto loan, or another type.
It’s important to gather this information before you start shopping so you know where you stand with lenders. Negative marks on your credit report and a low credit score will likely make it more difficult to get a loan with a lower interest rate.
2) Calculate how much you can afford
Once you know where your credit stands, take an in depth look at your finances to determine a monthly budget for a car. Don’t forget to factor in regular maintenance costs as well. Setting a budget before you begin to shop will help you stay on track and prevent you from agreeing to an option that isn’t affordable.
3) Shop for the best interest rates
Finding the right car is only one step in the process. Separately, you should shop around for the financing. Look for the best loan terms and interest rate.
Some lenders may perform a soft credit inquiry to pre-qualify you while others may perform a hard inquiry. Hard inquiries may lower your credit score. However, lenders will view multiple inquiries from similar creditors as one inquiry if they happen within 14-45 days. Shopping for rates shouldn’t negatively impact your score.
4) Research the vehicle’s history
Purchasing a used car is a great way to save money when you’re on a budget. Before you buy a used vehicle, do some research into its history. CARFAX provides comprehensive reports on a car’s history and includes information related to accidents, odometer readings, number of owners, and service records. You want your car to be safe and reliable, so it’s important to get this information.
5) Get an inspection
It’s always a good idea to have a mechanic do an inspection before you buy. Spending some extra money in advance, could end up saving you thousands on repairs later on.
6) Take it for a test drive
Even if you’re familiar with the make and model of the car, take it for a test drive to make sure there aren’t any notable issues before you commit to buying.
7) Read the loan agreement
Before you sign anything, make sure you understand and fully agree to the terms of the loan agreement. You should be aware of the length of the agreement, your monthly payment amount, how much money you’ll end up paying overall, and what occurs if you happen to fall behind on payments.
8) Know your rights
Before you sign any contract or financial agreement, make sure you know your rights. Should anything go wrong with your new car, you’ll want to know what your options are.
Seek Legal Advice
Flitter Milz is a consumer protection law firm that represents people with issues involving the denial of an auto loan due to inaccurate credit reports. Contact us for a free consultation if you have been denied an auto loan.