Getting an Auto Loan? Here’s What You Need to Know

Most of us don’t have the cash on hand to drive away with a brand new convertible from a dealership. You may find yourself shopping for a auto loan before you can shop for the actual car itself. Doesn’t sound too exciting, does it? Certainly not as exciting as the prospect of a new car. We’ve put together an all-you-need-to-know list of essential things for auto loan to make the process as quick and as painless as possible.

Auto Loan Credit Management

First things first – before you decide that you’ll be applying for an auto loan, you have to know what your credit situation looks like. A good credit score, history of borrowing/lending along with your income is what helps determine just how much interest you’ll be paying on the vehicle you intend to purchase. If there’s a bad credit score or a credit discrepancy in your records, you could end up paying far more than you ever imagined.

Review your credit history and credit reports, find and correct inconsistencies (should there be any) before you apply for a loan. It’s easier than ever to secure bad credit auto loans. Even if you’re looking for a car loan for bad credit, knowing where you stand goes a long way.

Documentation

Getting an auto loan is not a walk in the park. There is some documentation involved that needs to be checked, reviewed, and then verified before you are granted the financial loan for your new car. It’s essential that you check, and double check all your documentation and have them in the correct order to prevent any last minute glitches. Some of the documents you might need include:

• Proof of income
• Proof of valid ID
• Residential address validity
• Credit card statement
• Credit score
• Income tax returns
• NOC for the clearance of a previous loan (if any)

Pro tip: It’s best if you apply for and have an auto loan approved before moving or changing employers. A new address/new job will possibly raise red flags.

Budgeting

Know how much you can spend before buying a car. It’s important to have a strict budget to help clarify just how much you can afford to spend. If you don’t do the math first and dive headlong into vehicle shopping, the car salesmen can rope you right in by making a car appear more affordable than it really is.
For car loans, it’s always best to provide a substantial percentage of the total amount as a down payment (the upfront payment). This will not only result in a smaller loan but will also lead to a smaller number of monthly payments with lower interest rates.

Choice Flexibility

We all know we can get fixated on something that we like to the extent that we’re willing to pay more in the moment. If you end up overstretching your budget and purchasing a more expensive car, you may struggle to keep up with the monthly loan installments. Before you find yourself stuck in a similar situation, make sure that you are flexible with your choice of car and the choice of dealership.
Each car dealership may be associated with a different bank and offer different terms and interest rates on car loans. Avoid making your decision based on a single inquiry. Instead, opt to shop around and get quotes from a number of different lenders to ensure that you’re getting the best possible deal.

Payment Elasticity

Avoid taking on a loan that will come back to haunt you. You’ll be better equipped to make a good decision about your loan if you avoid falling into the common trap of focusing solely on your monthly payment (instead of the purchase price and the total cost plus interest). Stretching out a loan for a longer amount of time will decrease your monthly payment but you’ll end up paying a dramatically higher cost for the vehicle. You don’t want to end up in a situation where you owe more on the vehicle than what it is worth.

Look for a loan provider that may allow you to repay your loan in a lump sum payment without any foreclosure penalties. Don’t get upsold, or get trapped in a loan that has you paying a much higher interest rate than required.

The post Getting an Auto Loan? Here’s What You Need to Know appeared first on Credit Now | Auto Loan Financing.

from Credit Now | Auto Loan Financing http://ift.tt/2hcEaM2