The first purchase that most people make when they start their career is a car. They need it to commute to office daily and they cannot wait till they save such a huge amount. This is where car loans come into picture. The whole process of visiting the dealer’s showroom, comparing various features of different models, test driving and finally zeroing on the final choice is so overwhelming and time consuming that most people pay the least attention on the different ways in which they can finance it. They take the easiest option available and often end up regretting later when they find it too expensive.
Here are some ways that will help you secure the best car loan interest rate fast. If you follow these steps you will not only be able to finance the car faster, but you will also be able to bag the best deal which will not be too taxing on your savings.
- Check your credit score
Your credit score is an important aspect to be taken care of when you apply for a car loan. It will not only play a key role in your eligibility of the loan but also determine the interest rate that you will pay on it. A high credit score can help you save thousands of rupees on interest payments. There are a number of factors like the amount of debts you owe, your payment history that affect your score. Knowing your own credit score in advance will helps to avoid future surprises and gives you an idea of your own bargaining power. If you have a high score you can leverage it to get better terms and rates. If your score is low, you can take measures to improve it. Being aware of your own position will help you know whether you are getting the best car loan interest rate for your credit score.
- Understand the cost of loan and how much you can afford
The total cost of the loan depends upon three main factors. The first and the most obvious is the car loan interest rate. Lower the interest rate lower will be the total interest amount you will pay over the loan tenure. Second is the principal amount borrowed. If you make a high down payment initially, it will reduce the amount of money borrowed and therefore the interest costs. The third factor is the loan tenure. While a longer tenure reduces your EMI burden you end up paying a significant amount of interest. It is wise to keep the tenure as short as possible. You should also factor in other expenses like insurance, taxes, maintenance, petrol cost etc. when you set your car budget and determine how much you can afford.
- Shop around
Enter the dealer’s shop only after you have done your homework. You should have several loan options researched before you go to buy the car. To start with get online quotes to see what offers online lenders give. You need to shop around to get the best car loan interest rate in the same manner as you spend time and effort to shop for the car to get the best deal on your new vehicle. Do not assume that the dealer will give you the best rates and terms. The more options you explore the more bargaining power you will have to settle on the lowest car loan interest rate.
- Pre – approval
Contact your local bank or credit union to find if you can get pre-approved for a certain sum of car loan. With a pre-approval you can lock a car loan interest rate and then bargain for a lower one when you contact other lenders. You can compare the rates with the dealer’s offer and then choose the one that offers the best deal. Pre-approval offers usually expire if you do not use them within 30 days.
If you have an excellent credit score you will not have much difficulty in getting pre-approved. In case of bad credit, you may still get an approval but at a very high rate of interest.
Once you are pre-approved you can focus your efforts on choosing the best deal for the car you want to buy. Remember, a good credit score will help you sail through this process very smoothly. Hence keep your credit score in good shape and focus on strengthening your credit history if you wish to get the best car loan interest rate and get fast approvals for car loan.