1.) Who, What, Where, Why and How You Get an Auto Loan
Anyone shopping for a car should also shop around for a lender. It’s a misconception that you have to settle for the first financing offer you receive, and, in fact, you shouldn’t consult with only one lender any time you need to take out financing for a purchase. You can get an auto loan from several sources including:
- Credit Unions
- Car Dealerships
- Family & Friends
- Use Your House Equity
- Mafia (Although we know how this usually ends).
2.) Shop around – Just Not Too Much
Your definition of bad credit might not be the same as your our definition, and different banks will offer different interest rates. Do your research by finding out the available rates various lenders charge so you don’t get taken advantage of when you show up at the dealership.
We reccoment looking up a bank’s auto lending rate sheet to learn what the current rates are for new and used vehicles based on your current credit score and bring this information with you when you go shopping for a vehicle in Edmonton.
3.) Use a 2 Week Time-frame When Applying
Applying for an auto loan means lenders will check your credit score, and each hit on your credit bureau negatively impacts your credit score. The good news is that scoring models usually count every credit inquiry performed by an auto loan lender within a 2-week time frame as just one inquiry.
4.) Keep Your Term Short as You Can Afford
You might have lower monthly payments with a 5 year versus a 3-year loan but pay attention to the interest rate. Generally speaking, interest rates are lower for shorter term loans, meaning you will end up paying less for your car overall which means your car will still be worth something in case you want to trade it in since you have good credit now.
5.) Shop for a Newer Model vs. Older Model
While it is obvious that a used car will cost much less in most cases but the truth is older vehicles tend to charge higher interest rates than newer ones. We recommend anyone looking to finance a vehicle look at a new car first, and then newer used cars since these are the cars that tend to offer the best financing. However, it’s possible to find a better deal on an older used vehicle, so check out all of your options before deciding.
6.) Do You Really Need a Vehicle Right Now?
Question whether you really need a vehicle. Loan experts agree that people with bad credit should hold off buying a new or used vehicle until they have improved their credit score. If you must buy a vehicle, make as large a down payment as possible. Seek someone to co-sign a loan for you if you need to get your credit off the ground or back on track.
7.) Shop the Total Loan Amount, not the MonthlyPayment.
The only time you should consider the monthly payment is when you calculate how much you want to spend for your car. After that, don’t discuss monthly payments. Some lenders may focus on the payments to induce you to borrow more money by extending the number of months you pay. That way they make more in interest, and you have to drive your aging car longer.
8.) What’s Better for You – The Perks.
Which would you prefer – super-low dealer financing or cash rebates? A recent survey from bankrate.com shows that 9 out of every 10 consumers took the cash back.
9.) Don’t Sign Without Reading and Understanding the Fine Print
We know you just want to sprint out of the dealership and get driving, but if you remember only one thing from this article, let it be to read everything carefully before you sign the deal and walk away.
Neglecting this could end up costing you $1000’s of dollars and/or making your credit score even worse depending on what is included in your contract.
10.) Last But Not Least – Don’t Believe the Hype
There is an overwhelming stigma out there when it comes to subprime, prime auto loans. Everyone has trips to Mexico, hot tubs, free iPad, and the cheese goes on. My biggest pet peeve is when I see these so-called credit brokers who are only interested in harvesting your personal information and selling you to the highest dealership. We get you approved and you can literally walk out on the lot and choose from over 3000 Amvic Licensed vehicles right there in the flesh. Sure they can get you approved but you may not like the vehicle they approve you for.