Getting a car loan: everything you need to know
If you’re considering an auto loan, there are a few things you should do before you begin the car shopping process.
Establish a budget
Write out your monthly expenses and compare them to your household income. Consider how much extra you have to spend on a car, and remember to factor in insurance.
Check your credit score
If you’re buying on credit, you will be responsible for a monthly car payment + interest. The interest rate is going to depend on your credit score. A credit score is a snapshot of your borrowing history; it tells the potential lender how much credit you already have, if you pay your bills on time, and how much money you currently owe.
A credit score of 660+
If your credit score is 660 or higher (with 900 being a perfect score), then that means your credit range is somewhere between good and excellent. You will likely qualify for auto financing at the dealership’s published rate.
A credit score below 660
If your credit score is below 660 (with 300 being the lowest), you may be quoted a higher interest rate. This is because lenders will see you as a risk.
Compare interest on new cars versus used
Often used cars seem attractive because of their lower prices, but you will likely have to finance one at a higher interest rate.
Take your time and compare vehicle prices and auto financing rates so that you can make an informed choice.