7 Smart and Effective Ways To Get A Car Loan

Purchasing a car can be a huge, stressful hurdle. Not only are most cars expensive to purchase, but a car loan can carry high-interest rates, and many people end up spending months on end making payments with little relief in sight. There’s a perception that getting a loan requires a great deal of effort and research, as well as patience.

If you work with the right lender though, the process should be simple, and quick and give you a really clear idea of what your monthly payments are and when your car will be paid off in full. Cars are a big purchase and can be expensive to maintain so it’s no wonder that many people choose to get a loan that will allow them to spread out their payments. If you’re interested in getting a car loan but think it’s too complicated, here are some ideas to help you along the way.

1. Consider The Term Of The Loan

It’s important to consider whether or not you’re going to be behind the wheel of this car for a short amount of time or if it will be an investment for years to come. Short-term car loans, for example, are often easier and cost less overall than long-term ones. The pro is that you will pay less interest over a shorter loan period, however, the downside is that to pay off the balance on time, your monthly repayments will be higher than if you took another year or two on your loan term. Make sure that you’re aware of what your payment options are so that you can prepare for the financial commitments down the road.

2. Research Your Finances During The Application Process

Even if you’re not a finance expert, there are several things that you can do to give your loan application the best chance of being approved. First, if you cannot get approved for a loan immediately, try looking into lenders who offer financing alternatives like lease-to-own options. These provide more options to those who don’t have perfect credit or who are experiencing a rough financial time. Many online lenders will also have tiered pricing options based on credit profile, so you may be able to get a car loan if you’re willing to pay a higher interest rate.

Also, complete your loan application with all the relevant information about your income and expenses. Be as thorough as possible by answering all necessary questions, including previous late payments. This information is important for lenders to assess whether you are eligible for and can afford the loan you’re applying for – the less they have to follow up with you for more information, the quicker you’ll get your response! 

3. Determine the Amount to Borrow

You may think that the bigger the loan, the better, but that’s not always true. When you take on more debt, you also take on more interest and will be paying back more money in interest over the next few years. There are several ways to determine how much you should be borrowing. Checking with your bank is a great place to start, but don’t forget to do some research on your own. Start researching the type of car you want to buy so that you have an idea of how much you need before you start applying.

4. Select the Lenders You Like

Once you’ve researched and checked out your options, select the best lender for you. Please make sure you feel comfortable with the company’s loan program and that its history matches your goals. If there’s a lender that you feel 100% confident about, make sure to go with it. You should have a great experience with this company should anything go wrong or if there are any issues along the way.

5. Get Pre-Approved Via the Lender

If this is your first time applying for a car loan, you may want to research getting pre-approved. Getting pre-approved means you’ll be given an offer which you can then take with you when you go shopping for your car. These generally last for a set amount of time, such as two weeks. Once you find the car you want, you can finalise your loan to make the purchase. This means that the overall process is smoother, because you’ve already submitted most of your information to the lender and can move onto providing the details of the vehicle and reviewing your contract.

6. Review & Accept the Loan Offers

Once you’ve found your car, you can complete the loan process with the lender. If you’ve bought through a dealership, they will often be able to help you with this step but purchasing from a private seller is also an option. Just ask your lender what paperwork you need, as this may vary from company to company.  

Look carefully at your loan contract before signing and ask yourself if any other factors could affect your decision. Consider things like total cost of credit, interest rate, loan term and repayment amount and frequency when deciding if this loan is right for you.  Once you’re confident, you can sign your contract and pick up those keys to drive away!

7. Automate Loan Payments

Automating your loan payments is a great way to ensure that you’ll be able to make those payments on time. Try using auto-pay services so you won’t have to worry about forgetting and being late on the payment.

Conclusion

As you can see, there are a few steps to complete and some important decisions  to getting a car loan.  However, following these guidelines will help you avoid unnecessary misunderstandings and make the process as smooth as possible. Working with the right lender should make it feel simple and stress-free!

By: Raymond James

About the Author:

Ray is a sought-after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.