Posted by When you are looking to buy your first car, it can be overwhelming to figure out how much money you need, what kind of car you want, and how to get the best deal.
It’s especially tricky if you’ve never bought a car before, because there are so many different decisions to make, and it seems like everyone has their own opinion on the best way to do it.
Fortunately, there are some good tips for first time car buyers who want to get online auto loans, so you can have all of your questions answered in one place and do everything correctly from the start.
Not being intimidated by the process
While there are a lot of steps involved in getting an online auto loan, it can also be quite simple. For example, your first step should be to shop around for different rates and terms among lenders.
The key word here is shop. You should look at different lenders and see what kind of deals they offer you before you actually decide which one to use.
If one lender looks like he’s offering you a better deal than another, he probably is! So go with him instead and don’t worry about whether or not his rate will be good in six months or a year—that’s what refinancing is for.
Realizing you don’t need a perfect credit score
Getting a bad credit score has limited you from being able to buy a home or even get an apartment? It’s time to stop living in your parent’s basement.
Credit card and other types of bad debts are keeping you from buying that Honda or Toyota you have been wanting? You can still buy a car!
When looking at buying a new or used vehicle, don’t let bad credit and no down payment slow you down; just check out your options on getting online auto loans.
Sure, you might not be eligible for financing with some dealerships but many others will approve any applicant.
Those interested in more information should take note of our piece on tips for 1st time car buyers who want to get an online auto loan.
Being Prepared with Documents
The loan application process can seem daunting. But, if you come prepared with all of your documents and information, it will help keep things on track.
You’ll have a much better experience at your local bank or credit union if you know exactly what they need from you upfront.
Be sure to bring a copy of your driver’s license, as well as proof of income and residence—things like pay stubs or tax forms with your name and address printed on them.
Bringing along any type of lender pre-approval letter will also be helpful in expediting the loan process.
Seeking help from a Loan Expert
Looking to buy a car but unsure of how much money you can get or what type of loan is best? Seeking advice from an experienced Loan Expert can save you thousands in interest and take away some of your uncertainty.
While it’s not necessary to have bought a car before, many experts recommend that 1st-time buyers enlist professional help with financing because it’s one aspect of buying a vehicle that rarely changes and can be very confusing, especially when you’re under pressure from dealerships.
This is also important if you’ve never financed anything in your life before. If your credit score is below 700, getting an auto loan might be difficult;
Loan Experts say building credit history by applying for new credit cards and paying off balances on time will improve your rating over time.
Negotiating your interest rate
The average interest rate for a new-car loan was 3.24 percent in July, according to Bankrate’s most recent survey of banks and thrifts.
If you shop around and start with a lower rate, though, you can save hundreds of dollars on your monthly payments.
For example, if you have a credit score of 700 or higher and a down payment of more than 10 percent (no money down is available at some lenders), NerdWallet found that three years ago consumers could negotiate an interest rate about 0.4 percentage points lower than what their credit scores would suggest.
Even one point could save $50 per month on each $10,000 borrowed — $600 over 60 months — provided rates remain stable over that period.
Completing the Application Online (No Faxing)
When you purchase a vehicle, there is a specific procedure in place. You can’t buy a new car without financing. Unless you have $30,000 in cash or are buying an older vehicle, you’ll need financing.
If your credit is good and you have enough income to qualify for a loan, your next step will be applying online.
Choosing your loan term wisely
Getting an online auto loan for your first vehicle is a big decision. You don’t want to be over or under-insured. You also don’t want to pay interest on more than you need.
The longer your loan term, the more money you’ll save in interest charges and insurance premiums—but only if you can afford to pay off your loan quickly.
If not, you might end up paying more over time because of higher interest costs. Generally speaking, keep your loan term around four years or less; after that point, it gets tough to drive home any real savings.
Picking the right type of vehicle loan
The more cash you can bring to a transaction, particularly with a new vehicle, will help you get your monthly payments lower.
Auto loan rates vary depending on factors like your credit history and income. If you have good credit, you might be eligible for an auto loan with a rate as low as 3 percent.
Car buyers should shop around for rates before visiting or buying from any one dealership; there are plenty of companies that offer competitive financing options through their websites (and yours doesn’t necessarily have to be one of them).
Know what type of loan is best for you, so that when it comes time to negotiate your purchase price and monthly payment you can focus on negotiating how much cash you’re bringing in exchange.
Understanding how much you can afford monthly
While your credit score is certainly important, there are a number of factors that go into determining how much you can borrow.
The amount of down payment you make on your vehicle, as well as how new or used it is will affect how much credit you’re eligible for.
The lower your down payment, the more equity you’ll have in your vehicle—and thus be able to borrow against.
Likewise, a newer vehicle will increase your potential borrowing power by putting a greater portion of its value toward an outstanding loan balance (versus monthly payments).
Still not sure if buying a new or used car makes sense? Figure out how long it would take to pay off a new ride with an auto loan versus a lease and see which option would save you more money.
Avoiding Bad Credit Auto Loans
If you have a bad credit history, don’t immediately assume that getting an auto loan will be difficult. Getting approved for an online loan doesn’t require a great credit score – it simply requires proof of employment and good payment history.
When applying for an online loan, you’ll need a co-signer with great credit, who will help you establish or re-establish your credibility as a borrower.
That way, both of your names will appear on your contract; however, only one of you will ultimately be responsible for making payments on time each month.