To get a car deals and loans with the best interest rate, it’s essential to follow certain steps, such as shopping lenders and getting pre-approved, before going to the dealership.Your credit score and your income will determine how much you qualify to car deals and loans.
Don’t apply for a car deals and loans without checking your credit report first. If there are any errors or incorrect information on your report, such as fraudulent activity, you could be turned down for car deals and loans or offered only a very high interest rate.
You’re entitled to a free copy of your report every 12 months from each of the major reporting bureaus. (Because of the pandemic, you can now request a copy of your credit report weekly through April 20, 2022.) If you find errors or evidence of fraud when you check your credit report, you should file a dispute to correct them, before you apply for a car deals and loans.
Credit reports are the raw material used to calculate credit scores. Many banks, credit card issuers and personal finance services — including NerdWallet — also provide free online credit scores and report information. They are useful ways to gauge your progress, but they may not be the scores that lenders use to approve you. Most auto loan lenders use specialized scores that emphasize your history of repaying auto loans.
If your credit is sub prime or poor — typically a score of 600 or lower — and you don’t absolutely require a car right away, consider spending six months to a year improving your credit before you apply. Making payments on time and paying down credit card balances can help bolster your credit so you can qualify for a better loan.
You can look up average car deals and loans interest rates to get a general idea of rates for people with your credit scores.
You’ll want to compare quotes from the first three types of lenders first, even if you plan to take dealership financing eventually. Your own bank or credit union may give you a preferred rate, especially if you agree to automatic loan payments from a checking account there. You can also compare auto lenders online.
If you want to buy your car from a private party, rather than a dealer or broker, make sure that’s allowed by each lender you consider seriously. Some restrict where you can buy your car.
Before you apply for a loan, you should also take time to learn the car financing language you will encounter.
