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Tips on Getting an Auto Loan |  |
Trust us, it won’t be that hard to get an auto loan right now. The auto dealerships in this country are panicking and looking for every reason to qualify you for that loan. One of the surest ways to get qualified for an auto loan is to simply walk into the dealership, act like a nice guy (use self-control if you must) and fill out a credit application. Granted, you will have to have a job and verifiable employment. If you work for yourself, you make need to provide check stubs and 1099 forms and copies of your income tax return. You will have to have a stable residential history. You may even need a few references or a co-signer to make the deal work. However, compared to ten years ago, rest assured it is much easier to qualify for an auto loan in 2009!
Now qualifying for a bank car loan is a slightly different scenario. If you can qualify for a bank auto loan, you would actually be paying less in interest charges and get a break on minimum monthly payments. Auto dealerships don’t really care one way or the other. They get their money up front with a bank loan, but get more money in interest if they finance in-house. However, they don’t like financing for an extended period of time since that increases their risk.
Financing your auto loan through a bank makes everyone happy because it puts most responsibility on the bank. Right away, this tells you that the qualifying criteria are slightly more stringent. First off, know that credit score is far more important when you are working with the bank.
When it comes to financing in-house with a car dealership, the salesperson and car dealer can choose to overlook credit problems if you have a stable job and home location. With a bank, there is more at risk than just a car—it’s basically cold hard cash. The bank will scrutinize your credit and look not only for repossessions and civil judgments but also for past due accounts and high credit card balances. Work on improving your credit score.
Next, try to pay as much as possible per month. The benefit of working with a bank is that it saves you from high bi-weekly payments that the car dealership will want. However, the more you extend the loan (by reducing your monthly payment amount) then the more you will pay on the loan, thus adding on thousands of dollars of interest. Sit down and calculate a budget that will let you pay off the vehicle in a short period of time, but one that will not tax your other bills and resources.
Lastly, learn to shop around between different providers. You can shop around to different bank accounts or even to different car dealerships for the best deal. Bear in mind not all car dealerships will be approved by the bank you finance through. The bank may make demands on what car dealership is acceptable, or perhaps even what type of car is acceptable. Loans (the terms and the decision to extend credit) are usually determined by the consumer’s credit score and financial situation.
This may severely affect your buying power when it comes to finding the vehicle you really want. This is why you should consider financing a car in-house, as it gives you more freedom and a greater chance of qualifying for a loan, even with less than perfect credit.
You are right in assuming that now is the best time to buy a car, right in the “eye” of the great recession. Prices are low, creditors are generous and good quality cars are selling for dirt cheap!