5 Things to Know About Auto Loans

June 16, 2021
Buying a car is a major investment. Do you know what to look for when shopping for an auto loan? Choosing the make and model of your new ride is important, but finding the right financing is just as important. Before starting the buying process, you must be well prepared. Here are a few things you should know about auto loans.


Credit Score

Credit scores are a crucial factor when determining interest rates for auto loans. The higher your credit score the lower your interest rate will be. Credit scores may also affect your down payment. If you have a low credit score, you are more than likely to be asked to pay a larger amount toward the down payment. Federal law allows you to get a free copy of your credit report every 12 months through any of the three credit bureaus or at www.annualcreditreport.com. Check it regularly to make sure your credit report is accurate and up to date.
 


Do your homework ahead of time

Determining how you’ll finance your car should be one of your top priorities before you make your final car selection. In most instances, this includes two options: you can get financing terms ahead of time (through a bank or credit union) or you can obtain financing at the dealership. If you choose to work with a bank or credit union ahead of time, you may be able to save time at the dealership after you negotiate the price of the car you’re interested in purchasing. If you do explore other financing options, having loan terms already in hand doesn’t just make the process easier, it gives you a point of comparison, so you’ll know if your loan is the lowest rate or if there’s a better deal out there.


Getting pre-approved before heading to the dealership

If you’ve purchased a vehicle before, you’re probably like most drivers: you researched the car you like, shopped around for the best deal and made a trip to the dealership for a test drive. Then once you’ve made up your mind, you’re ready to sign on the dotted line. In this scenario, you’re leaving it up to the dealership to define your creditworthiness and match you with a lender. Instead, visit a credit union to get pre-approved before purchasing. This not only ensures that you get the lowest interest rate that you qualify for, but it also helps you understand what type of car you can truly afford.


Consider the length of the loan.

Auto loans typically come in 3-, 4-, 5- and 6-year terms. The longer the loan term, the lower the monthly payment. But a longer loan term may also mean you owe more than the car is worth. Start by determining how much you can realistically afford each month for a car payment without straining your budget and make sure to include things like car insurance and maintenance in your calculations. Then choose the term that works best for you and your budget.  

Your financial institution can also help find the perfect vehicle for you.

A credit union or bank is more than just a lender – they can also be a resource for finding the right vehicle. Online shopping tools enable you to enter the car criteria you’re looking for and find matches near you. For example, our AutoSMART tool allows you to easily browse local dealer inventory, research and compare vehicles, or build the perfect vehicle. With the click of a mouse it also gives you access to Kelly Blue Book® and NADA appraisal guides, member-only pricing and help with selling your current vehicle.
 
If you’re interested in financing or re-financing a vehicle, one of our member service specialists can help you navigate your auto loan. Contact us at 888.233.7228 or visit one of our offices.