Preparing to buy a car for the first time is an exciting experience you will likely never forget. And to fund this purchase you will probably need to secure a car loan. Securing a loan to purchase a car is not nearly as complicated as it may seem if you are experiencing the process for the first time. In fact, you can make the process quite simple and ensure you leave the lot with the best car for you by paying attention to the following tips.
Check Your Credit
There are many places online that will provide you with your credit score in a matter of minutes. If your credit score does not reach the 670 score threshold that most lenders require, you will probably do better to use a cosigner to secure a car loan. The same holds true if you are a person that possesses no established credit.
Make a Budget
The first step in this process is to subtract your monthly bills from your monthly income and write down the number that remains. Next, subtract other essential expenses like food and the things you need for work or school. The number that remains is what you could conceivably pay each month for your car loan. However, you will want to leave yourself a bit of wiggle room for unexpected expenses.
Comparison Shop for Cars
You can begin the car selection process using an online site like Edmunds or Kelly Blue Book. These sites will allow you to get an idea of the cars that are within your budget. Once you have identified the car that you both like and can afford, you can then check for dealers in your area that carry the car. Talk to a few of these dealers and determine where you can find the best deal.
Save for a Downpayment
Taking the time to save the money necessary for a 20 percent down payment will pay dividends both in the short and the long term. Small loan amounts will not only allow you to pay less money each month for your loan but will also save you money on interest over the life of the loan. Additionally, you will pay zero interest on the upfront money you spend.
Comparison Shop for Lenders
You can begin vetting lenders by determining which lenders will extend a loan to you for the car you selected earlier in the process. Once you possess a list of lenders to choose from, compare these lenders against each other based on interest rates, loan terms, and all other relevant factors. You will then know the lender that best fits your particular needs.
Seek Pre Approval
Securing a preapproval for a car loan is not much different from being approved for an actual loan. Once you are preapproved, you will know exactly the rates and terms you will receive on a loan. You will then have from 30 to 90 days to complete the car buying process. Getting preapproved for a car loan will require you to submit documents that verify your income and identity. A hard credit check is also necessary.
Purchase Your First Car
Once you successfully find both a loan and a car. It is now only a matter of signing whatever paperwork is necessary to finish the process. If it is your first time dealing with contracts or a large financial obligation, it is probably best to have someone you trust to go over this paperwork with you.
The Bottom Line
Buying your first car is likely to be one of the most exciting and stressful times you have so far experienced in life. However, there is nothing to fear regarding the loan process if you take a little time to plan ahead before acting in a sensible fashion. The seven tips above provide a solid process for anyone seeking to secure their first car loan.