Car Loan Sense

Getting an auto loan for a car is a big deal. Before you agree to pay all that money back with interest, it helps to carefully think through your purchase. Here are some tips that can help you find the best deal for your car loan dollar:

• Research. Figure out how much the car you want usually sells for. You want to make sure that you are not getting ripped off. Know the retail, wholesale, and private seller values of the car you are looking for.
• Find out about possible rebates and special financing options for your car loan. This can help you get a good price on a car.
• Take it for a test drive. Try to get some highway driving in as well, since the higher speeds can affect the car’s performance differently from driving in town.
• Have the dealer get a CarFax report for you. You can get one yourself if you need to (if you are buying from a private seller), but it will cost you money. Most dealers will pull the report for free. If they won’t go elsewhere.
• Negotiate on the price. Find out how much a dealer pays for cars and negotiate up from the invoice price. You will get a better deal than if you negotiate down from the retail price. With a used car from a private seller, negotiate up from the wholesale value.
• Stay away from the “extras.” There are all sorts of things a dealer will try to throw in at the end, including “protection” and things like special “window sealant.” Try to avoid these things. Paying for a service contract is not a bad idea if you plan to keep the car for more than four years.

There are a number of tactics you can employ in order to get a good interest rate on your car loan.

Getting the best possible interest rate on your car loan can result in saving a great deal of money over the term of the loan. It is a good idea to look around and research possibilities before choosing to get a loan from a particular lender or dealer. A one percent difference in interest rates can make a big difference in how much you pay over the life of your loan.

Improving your credit

One of the best things you can do to get a better interest rate on an auto loan is to work on improving your credit. This is one of the biggest factors in the interest rate you are offered by a lender. Improving your credit score can make a big difference.

Shopping around for a good car loan interest rate

Instead of sticking with the first lender, shop around for interest rates. See which lenders offer the lower rates. Word of caution: avoid getting actual credit checks, if possible. If you have more than a couple credit checks in a couple of months it can negatively impact your credit report and score. You can usually get ballpark figures from loan officers by sitting down with them and being explicit about your finances.

Getting a car loan during a “loan sale”

Many lenders offer “loan sales.” These are special events in which the lender offers special, lower interest rates on car loans. You can get a better deal if you apply for your auto loan at a time when the lender is offering better interest rates on auto loans.

Look for a car loan online

Many online lenders offer good deals on car loans. Even more traditional lenders often offer special, lower rates for online car loans.

There are ways you can improve your credit score and get a better interest rate on your car loan.

If you have checked your credit report recently, and gotten a copy of your credit score, you probably have a pretty good idea of where you are, credit-wise. And chances are, if you are like most of us, you wish that your credit were a little better. There are some things that you can do to boost your credit score and help you get a better interest rate on your auto loan:

• Make your payments on time. Pay your bills and other obligations on time. Your utility company may not be listed on your credit report, but after you miss a couple payments, it will be. Credit card payments that are late are often reported for each late payment. So give yourself plenty of time to get the payments in.
• Pay at least the minimum each time. Be sure that you are paying the minimum payment each month. Less than full payments are often reported.
• Try to reduce your credit card debt. Credit cards that show as being near the limit are negative items on your credit history. You can improve your credit score by paying down some of that debt.
• Live within your means. Having a high debt-to-income ratio can knock you down a few points, even if you make all of your payments on time. Make sure that you have plenty of breathing room between your debt and your income.

Practicing good credit and debt habits for three or four months can make a difference in your credit score and history. If you have a year to wait before getting a car loan, you can significantly impact your credit history. However, if you need the car now, you can get a car loan at a higher interest rate and then refinance to a lower interest rate a year or so later when your credit score has improved.

One of the biggest factors in how lenders determine your car loan interest rate is your credit history. This makes your credit score very important.

When you apply for a car loan, one of the things a lender will do is check your credit report, and get a copy of your credit score. Your credit report, or credit history, contains a record of the loans you have had in the past, as well as your payment history on the loans. Additionally, if you have neglected to pay a bill or two, these might appear on your credit report as well. Your credit score is a numerical representation of your credit report. Both of these items are important factors in determining the interest rate you receive.

Saving money with good credit

When you have good credit, you save money on your car loan because your interest rate will be lower. The higher your credit score, the lower your interest rate. Here is a simple example:

If you borrow $12,000 for a car at 7.5 percent interest, you will owe $900 in interest for the first year.

Interest is usually compounded for the length of the loan, since most car loans operate on a fixed interest rate, and the total amount to be repaid is determined at the time you get the financing:

Say you borrow your $12,000 at 7.5 percent interest, paying $900 in interest per year. Your loan is for 4 years, so you pay $900 a year in interest ($3,600 total interest).

But what if you have credit that is not as good? You might have to pay an interest rate of 9.5 percent. Here is how those same numbers would work out:

$12,000 x .095 = $1,140 for the first year. If you multiply that for 4 years, you end up with $4,560. That’s a difference of $960!

The above are over-simplified examples. Compound interest works a little differently, and you will likely pay more in interest that stated above. However, the difference might also be larger. And the longer the term of the loan, and the greater the difference in interest rates, the more you could save — or pay. You can save a great deal of money over the life of your car loan when you have good credit.

The interest rate you get on a car loan is dependent upon a variety of factors.

An inevitable part of any car loan is the interest rate. When you get an auto loan, you will be charged a fee, usually expressed as a percentage of the loan balance each year, called the interest rate. All loans, including those for credit cards and homes, carry interest rates. A car loan is no different. You are charged a fee as part of the price of borrowing money.

How car loan interest rates are figured

Base interest rates are set by the Federal Reserve. When you apply for a car loan, this base rate, called prime, is the lowest rate you are likely to be charged (unless there is a special deal). However, most people pay more in interest on their auto loans because other factors contribute to lenders adding percentage points onto the prime rate. Some of these factors include:

• Your credit history
• Amount of your down payment
• Amount of time you want the car loan for
• Condition and age of the car
• Income level
• Special “loan sales”

There are various ways to improve your interest rate. And it is a good idea to do so, as the lower your interest rate, the less you pay in fees. And that means you can save money in the long run.

Getting a car loan over the Internet can be a good way to save money and expedite a loan.

It does not matter whether you are buying your car online, or whether you are purchasing from a “bricks and mortar” dealer. Either way, it is possible to get a car loan online. Online financing for many types of loans, including auto loans, is becoming rather popular because of how easy it is to fill out the online forms and how the process is expedited electronically. Additionally, many online lenders offer car loans with lower interest rates and many will waive your fees. And it is very easy for the online car loan provider to get the money for the car into your account. However, it is important to be careful and take certain steps to protect yourself when getting online car loan financing.

Security measures when getting a car loan over the Internet

When you get an auto loan, whether it is over the Internet or in person, certain information is required. This information is sensitive in nature, and if you are not careful it can become compromised. Here are some steps you can take to protect yourself when applying for an auto loan online:

These days, you can get just about anything online. Why should a car be any different?

In a world where you can buy couches online and do your banking without leaving your house, it is hardly a surprise that you can purchase a car online. Car purchases online are going up because it is possible to search a wide variety of makes, models, and styles. Many online ads include pictures, so you can see what you are getting. Plus, search features make it easier to limit the results you get, ensuring that you only get cars that fit within your price range.

Finding a car online

There are many places to look online for cars. Two of the most popular car Web sites are www.autotrader.com and www.cars.com. Both of these Web sites offer searches based geographical location, as well as other factors. Additionally, dealer and private seller cars are listed. You can find someone who lives nearby, or you can arrange for the transport of a car from far away. Companies like CarMax (www.carmax.com) specialize in offering transport services. You can even get a loan online to help you more easily pay for your Internet car purchase.

Word of caution

As with all online transactions, carefully research who are buying the car from. It is probably best if you choose a car nearby so that you can inspect it yourself and meet with the seller face to face. Making sure you are dealing with a legitimate person or company is important when buying items, especially cars, off of the Internet.

One way to boost your credit score is to get a loan that you can make regular and consistent payments on. A car loan can be just such a loan.

If you are suffering from the effects of a bad credit score and you want to improve it, you can use a bad credit car loan to help you re-establish your credit. Because auto loans are among the easiest loans to get, even if you have bad credit, you can use them to help rebuild your credit history. If you need to fix your credit score, a bad credit auto loan can be just the thing to help you begin re-establishing yourself as creditworthy.

Making the payments on time

The reason that car loans are helpful for re-establishing credit is because it offers you a chance to make reasonable payments on a regular basis. If you have a car loan for a modest car, making payments of about $150 per month, you can start to build your credit score. This is because you make your payments on time, and usually in full. Making such payments regularly is a big help to your credit score, and you get another boost when you successfully finish paying off the loan. Make sure, though, before you get the auto loan, that you can handle the payments. If you can’t then a car loan will only serve as one more loan that sinks your credit score lower.

Most likely, if you have poor credit you will only get an auto loan if you go through a dealer.

Bad credit car loans, though easier to get, represent limitations as to whom you can borrow money from. Most banks and credit unions will not issue an auto loan to someone with poor credit. The risk that you will default is too great for a regular bank or credit union. There are loan brokers who can work out a deal, but you are most likely to get bad credit auto financing from an auto dealer. Most dealers are equipped with special lender relations that allow them to help you work out a loan.

Getting a bad credit car loan from a dealer

Most dealers will try to work out an auto loan, no matter how bad your credit it. This can be a great boon to you as you search for a car loan with poor credit. Dealers assume the risk of your bad credit by helping you get a loan with specific lenders who work with people who have bad or insufficient credit. However, you should be prepared to pay a higher interest rate for such loans. The good news, though, is that if you get your credit in order you can refinance to a lower rate with a bank or credit union a year or into your loan.

Even if you have bad credit, it is possible to get a car loan. However, you will have to submit to higher interest rates and fees.

Many people feel despair over their bad credit. It may feel as though you will never be approved for a car loan. There is no need to feel down about it, however. Bad credit car loans are becoming more and more available to people in many different circumstances. Even if you have dab credit — even a bankruptcy — it is possible to get an auto loan. However, there are certain inconveniences that necessarily attend a bad credit car loan.

Car loans are more expensive for people with poor credit

Even though you will probably be able to get an auto loan with bad credit, you should realize that you will pay more for the privilege of borrowing the money. Most lenders and dealership financers will charge you higher interest rates if your credit history is poor. Additionally, you may be required to pay higher fees up front. Most bad credit car loans, however, are made without having to put forth much of a down payment. This means that you will have more money to repay in the long run.

Taking advantage of special programs

There are plenty of special programs and deals out there for people with bad credit who want to get a car loan. By carefully researching lenders in your area, you can find those that work especially with people with poor credit. It is also possible to find lenders online to help you with a bad credit car loan. But beware! Though there are people genuinely interested in helping you, people with bad credit who are desperate for a loan are just the people scammers prey upon. Be careful of whom you deal with.