Finding a low interest rate on an auto loan could save you hundreds, if not thousands, of dollars over the term of your loan. To help you find the best auto loan that may be available to you, we’ve put together the following suggestions, starting with knowing your credit score, then moving ahead to compare different lenders and offers.
Understand Your Credit Score
Before applying for an auto loan, you should first know where your credit stands. The FICO® Score, which is commonly used for credit scoring, ranges from 300 to 850. The higher your score, the better loan terms you can negotiate with a dealership or lender.
Checking your credit report (you’re entitled to a free credit report once a year from each of the three major credit reporting bureaus) could help you raise your credit score by letting you know if there are any errors, such as a misreported late payment, that you may be able to fix. It’s also worth contacting your creditors directly to ask whether any late payments may be forgiven or any errors removed from your record. Improvements in your credit score could help you get lower interest rate offers on loans.
If your credit is in good standing, it’s possible you may have a variety of lender choices for an auto loan. The largest lenders are usually banks, and they often give existing customers affordable options. It’s a good idea to check your bank to see what auto loan rates may be available to you.
Car manufacturers themselves are also big lenders, offering some of the best loans through their own credit departments. Other potential lenders include local banks, credit unions, and small finance companies. Regardless of which lender you ultimately choose, shop around to compare lenders and what kinds of policies they have before committing to a specific loan.
Compare Loan Offers
It’s not always easy to tell if you’ve been given a good offer. It’s therefore important that you take your time to compare rates, and any discounts, to ensure you’re getting the best deal available. You could even try securing a better rate by using an offer from one dealership as leverage with another. It’s in your interest to explore whether any offer can be improved upon.
Keep these tips in mind as you begin the process of financing a new car. When you’ve finally received an offer you’re confident about, be sure to read all loan documents before signing to ensure the numbers and terms in the contract match the agreed-upon deal.