- Get competitive quotes: One of the smartest ways you can ensure that you’re receiving the most cost-effective loan is by getting competitive quotes. The Internet is a perfect tool for this, as you can comparison shop with a number of lenders all from the comfort of home. But even better, through services such as Automobile.com you can have comparison quotes created on your behalf. By receiving multiple quotes, you can assess several loan proposals at once and select the one that offers you the best advantages.
- Keep your credit in good standing: Your credit rating could be the most important factor for getting approved for a low-interest rate auto loan. Several factors go into creating your credit score, which is also called a FICO score. You can improve your score gradually by always paying your bills on time, keeping balances on credit cards low, and keeping your credit card accounts open for several years (not opening and closing accounts haphazardly). In general, consumers with a credit score above 700receive preferable interest rates.
- Think about term: If low monthly payments are your concern, then you may want to consider extending the term of your loan. If you select a loan with a 60-month term, you will pay less each month than a loan with a 48-month term. Of course, you will pay more in interest overall – but this may be a necessary decision to help you get approved for a loan you can afford. Conversely, if your goal is to pay off your loan fast, you may consider a 36-month loan if you can afford the higher monthly payments. In the long run, a shorter term loan will save you money overall because you spend less on interest.
- Shop within your budget: Can you really afford leather seats or a moon roof? If these luxury items are costing you thousands of dollars you don’t have, you might want to consider a stripped-down version of the car you have in mind. Here’s why: That extra $5,000 in luxury add-ons also means $5,000 on the balance of your loan, which means you’ll be paying for that moon roof for the next five years (or longer).
- Be a critical consumer: The Internet is making the loan-application process much easier for consumers, and it’s also putting them in control. Rather than walking into a bank and applying for a loan, you can apply for several loans at once online. This means multiple banks are competing for your business – and not the other way around. There’s nothing wrong with shopping for a loan just as you shop for a good deal on a car. Be a wise consumer, and you can find areas to save money in the long run.
Purchasing a car is a necessary part of life, and getting an auto loan is a common element of the car-shopping process. But just like shopping for a car, you can shop for your auto loan. There are several different strategies that consumers can employ to save money on their auto loans. By practicing these smart shopping tips, you can feel confident that you’re getting the best loan to fit your needs. Here are some of the most common strategies you can employ today:
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