How to Get an Affordable Auto Loan

You got a great car at a great price, but that’s only half the battle. You also need a loan with terms that are in line with your budget. Here are a few tips for getting an auto loan with an affordable rate and fees.

Shop Around for Loans

There are many different auto lenders out there, so don’t be afraid to ask friends, family, and co-workers for recommendations on which company they used when they bought their last vehicle. Once you have some leads, set up appointments with each company to find out what their terms are.

Check Your Credit Standing

The first thing you need to do is get familiar with your personal credit history. Your credit score is a big factor in determining your auto loan rate—the better your score, the lower your rate. If your credit score is surprisingly low, get a copy of your credit report and check for inaccuracies on it. Wrong entries on your credit report can bring down your credit score substantially. If your credit score is low due to payment defaults, consider working on improving it before applying for a loan.

Do Your Research

If you’re interested in getting a car loan, start by doing a little research online. You can find auto loan calculators that will help you determine which type of financing and payment plan is right for you. Also, look for reviews of lenders, so you can narrow down your options to companies with solid reputations. Make sure to pay attention to interest rates, repayment terms, and any possible penalties that come with the loan.

Consider the monthly payment and not the total loan amount

To encourage people to sign on the dotted line, some car lenders extend the repayment period on their loans, making the monthly payments seem affordable. But if you stretch out your loan over a longer period, you could end up paying much more in interest than you had planned. So, when shopping for an auto loan, look at how much you will owe the lender in terms of interest over the course of the loan period, as opposed to just your monthly payment.