Buying a new car is a big deal. It's one of the biggest purchases you'll ever make (next to your home and maybe your education). That said, you'll want to purchase a reliable car. Make sure you get the best deal by financing the purchase with an auto loan.
An auto loan is a fixed term loan (usually for five years) that's used to fund the purchase of a new or used car. Interest rates and repayment schedules are set in the beginning stages of the loan process and remain the same for the duration of the loan. The car is held as collateral in case of a default on the loan, but once the loan is paid off— the car is all yours.
If you're in the market for a new (or used) car— here's what you need to know about obtaining an auto loan:
1. Find a Car That Fits Your Budget
There's no sense in shopping around for a car out of your price range. The truth is we all have budget limitations. We need to live (and spend) within our limits to stay financially stable. Start by shopping for a car that has all the features you want. If the cost of the car is higher than your spending limit, negotiate with the dealer. If negotiating still doesn't help your bottom line—go to the next best car.
2. Pull Your Credit Score
When you apply for an auto loan, lenders pull your credit score. To avoid any unwanted surprises, check your credit score before visiting your local dealership. This way you'll have a clear picture of where you stand financially. You'll also have a better idea of the rate you can expect to receive. If your credit score is only average, don't expect to receive the absolute best rate. In addition, don't apply for financing with too many lenders. According to Bankrate, "Every time you apply for a loan your credit score goes down and it makes it slightly more difficult to get a prime-rate loan."
3. Shop Around for Auto Loan Rates
Dealers' interest rates aren't always the best rates. You can expect more favorable interest rates from credit unions. According to US News, "Rates at a credit union are typically much lower than the average rate at a competitor bank." In addition to your credit score, lenders require a variety of personal and financial information which may include:
· Proof of employment
· Income verification
· Details of the car purchase agreement
Once you're approved you can get in the car and drive off the lot—just don't forget to purchase insurance. If you're buying a new or used car you might be able to find an auto loan that fits your needs at Coosa Valley Credit Union. Don't hesitate to contact us if you still have questions or want to get pre-approved!