10 Tips for Finding an Auto Loan or Auto Financing

Auto financing is one of the easiest sources of credit available if you know the right strategies. Consider these tips for your unique situation.

#1 Use Lenders Known to You


If you already have a good relationship with a lender, like your bank or mortgage company, ask about adding a car loan. This is typically only an option for good credit borrowers who fall into a low risk category.

#2 Go Straight to the Dealer


Dealers often offer the easiest loans because they have an additional incentive to work with you: they want to sell the car. Dealers will often work with medium risk borrowers; some will even work with high risk borrowers if those people have a high, stable salary.

#3 Seek Alternative Lenders


Bad credit borrowers may need to look to independent financiers or online lenders for loan opportunities. Try asking a used car dealer in your area for recommendations. Used car dealers are more likely to work with bad credit borrowers on a regular basis, and they often know of creative solutions for those who are otherwise not credit-worthy.

#4 Prepare Your Credit


Your credit is the single greatest factor in whether or not you will get a loan, so be ready for a credit check by making all debt payments for at least two years leading up to your car loan application. You should also pay down balanced on any revolving lines to lower than 10% of the total limit on the loan.

#5 Save for a Big Down Payment


The more cash you have in hand when you go to the dealer, the more you can offer in immediate profit and the lower your loan sum will be. Paying more than 20% down will typically open the door to gaining a good loan.

#6 Use a Co-Signer


Very low credit borrowers can use high credit co-signers to expedite the car loan process. Using a co-singer will negate some of the positive credit benefits of paying off the loan, but is the only option for some borrowers.

#7 Opt for High Monthly Payments


Lenders like borrowers who agree to pay off a loan very quickly with high payments each month. These borrowers present less risk for the lender, but these loans can be much pricier in the short-run. Set aside savings to help make this a reality.

#8 Buy at the Right Time


The end of the year is often the best time to buy cars as dealers look to empty their lots of last year's inventory. Look for closeout sales on models that have been replaced by newer cars.

#9 Sacrifice Terms


You can accept higher late payment fees and other penalties in order to entice a lender into approving your financing. Lenders are not always up front about these options, but you can negotiate with a lender if you are turned down by playing these cards to your favor.

#10 Budget Appropriately


Know what you can afford in monthly payments long before you seek a loan. This will not only give you protection from default; it will also ensure you know when to walk away from a deal you simply cannot afford.


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