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10 Important Reminders Before Getting An Auto Loan

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A car brings you to places and offers you the convenience and luxury in life. Majority of customers purchase cars by getting an auto loan. This makes buying a car easier and more affordable. Car loans in the USA have been increasing, which shows that consumers have confidence in the recovery of the country’s economy.

Getting An Auto Loan

Is getting an auto loan a right decision?

The spending statistics of 2013 reveals that the consumers’ auto loan balance has significantly soared. The Federal Reserve Bank of New York stated that the increase has been climbing without fail for the last 10 quarters. This has pushed the car loans higher in the debt list, which is as follows:

  • Mortgage Loans: $8.43 trillion
  • Student Loans: $1.03 trillion
  • Auto Loans: $0.84 trillion
  • Credit Card Debts: $0.67 trillion

If you think that getting an auto loan is an unwise decision, the New York Federal Reserve tells us otherwise. This is proven by the decline in car loan payments beginning in the third quarter of 2012. If you are looking into getting a loan for a new car, here are some tips you can use.

Determine your budget.

Start by asking yourself what you need the car for. Do you just need a practical one to drive yourself to work of a big van that can fit your whole family comfortably? These will give you an idea what type of car to buy. Proceed with evaluating your finances to figure out if you can afford one right now. If you are getting an auto loan, see if you can meet the monthly payments on top of your usual expenses. Be honest with your assessment.

Figure out the best time to buy a car.

The end of the month or the year is usually the best time to buy a car. This is because during this time, dealers push to get more sales to meet their quotas. Likewise, new car models are released in September and October and dealers offer special deals to dispose the older models. You will be surprised at the huge savings you can make if you purchase your car at the right time.

Choose a car dealership.

Do your research well. Know more about the car dealers in your area before you schedule your visits. Know who has the highest customer satisfaction ratings, best after sale service, and greatest deals.

Find out the invoice price.

Check out the car dealers’ websites for the invoice price of their cars. The invoice price is the manufacturer’s price and the selling price is what you can negotiate.

Delay the purchase if you can.

If you can save up for a few months to pay for a portion of the car price, it would be to your advantage. When you are getting a car loan, the lesser the amount, the lower the interest.

Check if you can qualify for a car loan.

You may want to check on your credit score. Although, you can still be approved for a car loan even with a bad credit, it will be for a steeper rate. If this is the case, try to approach other loan establishments, like credit unions, etc.

Visit the car dealer with a person you trust.

If that person knows about cars, then it is more advantageous.  Your companion will be able to give you a sound advice and help you with the negotiations.

Inspect the car thoroughly.

This is especially true with used cars. Make sure that you are getting your every penny’s worth. Get a real feel of the car you are purchasing by taking time on your test drive.

Know how you can negotiate the price.

When negotiating prices, be armed with three things. The first is, knowing your credit score. If you are credit worthy, you have a good chance of negotiating at least a reasonable interest rate if you’re getting an auto loan. The second is, trading in your old car wisely. Some dealerships offer you a good rate on the new one, but give you a lowball price for your old car. The third is, keeping your budget in mind. Never be tempted to get a car you can’t afford.

Don’t make rash decisions.

It’s alright to walk away if things don’t seem to go as planned. Don’t make the mistake of displaying an urgent desire to buy a vehicle. If dealers notice this, it will be harder for you to negotiate. If you feel that you are not getting your money’s worth, don’t hesitate to drop the deal and walk away. This is why it is very important to do a good research before visiting the dealerships. It allows you to know for certain when to walk away and when to go ahead with the purchase.

What to Do If You Are Rejected From a Loan

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If you apply for a loan and you are rejected many lenders tend to use a 2 digit reason code to tell you why, instead of a proper explanation. Instead of explaining fully why you have been rejected from a loan lenders are using the codes as general rejections and all you have to do is look at the glossary and see which part of credit history made you get rejected. In the past lenders legally did not have to disclose information with borrowers as to why they were rejected and although using codes has this information, it is still quite confusing to the consumers as the explanations are so equivocal. If you have been rejected from a loan and are struggling to understand the codes, here are some ways to make sure you stay in control:

If you are unsure about your code just ask

There are many complaints about the reason codes – they use terms that people are not familiar with and do not define the codes properly, therefore confusing people when they should actually be helping them understand why they have been rejected. Although they have been designed to help the borrower see why they have been rejected from a loan the language the lenders use is often confusing. If you find a reason code unclear ensure you understand it properly before you accept the lenders decision. VantageScore has created a website where you input your reason code and it gives you a more informational explanation or you could just simply contact the lender and ask them what it means – they will be happy to help!

Rejected From a Loan

Unethically rejected

If your credit score is poor you may feel like you have been unethically rejected when applying for a loan or any type of credit. You are allowed to examine the situation and check that the lenders have not overlooked anything and that none of your information was used unfairly. Make sure you don’t let the situation pass – sorting it out could help you to better your credit score and it could help you get the credit or loan that you want. If there has been some information used that shouldn’t have, they will remove this and go over your application again – giving you a second chance at obtaining a loan or credit.

Keep an eye on your credit score

Make sure you look at your credit score on a regular basis to see what your credit is like and which bracket of credit you are in. You can get three credit reports a year – free of charge – but it is better to set up a tracking service, which will allow you to check and monitor your credit more regularly. Therefore if you do get rejected from a loan you will not be shocked as you have your credit report there so you can see why you have been rejected.

Boost your credit score

Your credit improves slowly over time, but it is vital to take action as soon as you notice a decline in your credit score. Every little action you make will improve your overall score. A decline in you score may be down to a clerical mistake or late/missed payment. As soon as you discover an error fix it right away to ensure your credit is not harmed. You can also improve your credit score by making payments on time and keep accounts that have been paid properly open – even if you do not use them.

Credit scores affect a lot of things

As you probably already know it is important to check your credit report regularly. Your credit score is normally what sways a lender when it comes to offering or rejecting you for credit or a loan. A credit score can affect a number of things:

  • Mortgage terms
  • Interest rates
  • Apartment rental qualification

It is important to check your credit score regularly so you know how to keep yourself from getting into financial trouble later on. The more you know about your credit score, the better your relationship will be with your finances and the better your finances will be in the future. Read your credit report carefully so that you understand it and you know what things you may or may not meet the requirements for. When you know what it all means you will understand what you qualify for and what to do in the future.

Try to avoid difficult situations

When you have been rejected from a loan try not to get yourself into a situation that makes you feel confused. If you know how your credit score affects you financial openings – even an offer of a job – you will stop yourself being confused at a later date. Let’s just hope they don’t start using reason codes for job rejections too.