If you want to get a loan for a used car, be ready to talk about a good deal. At first, car salesmen try to get potential buyers to agree to a high price and rate of interest. Obviously, this move doesn't help you in any way. Instead, it makes more money for the dealership. If your credit is good, you can negotiate for a better deal. But if your credit score is low, here are some tips to help you get an auto loan with a low interest rate.
Improve your credit rating and score
Before giving you a low rate on a loan for a used car, the dealership or bank will look at your credit report. Credit reports show whether or not we deserve credit. If you have missed or paid late on several bills, lenders will think you are not a good candidate. If the lender agrees to give you credit, they won't give you a low rate.
The best way to get a low rate on a used car loan is to work on your credit. A person with bad credit can still get a loan, but the fees, interest rate, and terms are terrible. Put off buying a car for at least six months to a year to avoid having to pay more in fees. Now is the time to work on improving your credit score.
First, look over your own credit report. If you owe money to people and haven't paid them yet, get in touch with them and set up a payment plan. Plan to lower your ratio of debt to income. Also, make sure you pay all your debts on time and never miss a payment.
Get a co-signer or put some money down.
Having a co-signer is a great way to get a better rate on a used car loan if you have bad credit. Your co-debtor must have good credit if you want to get low rates. Lenders feel more comfortable when you have a co-signer with good credit. If you can't pay back the loan, the person who co-signed for it will have to pay the money back. Also, saving money for a down payment will help you get a low rate, whether you have good or bad credit.
Get quotes from different lenders for auto loans.
Instead of getting a car loan through a used car dealer, look around for your own financing. If you have good credit, your bank or credit union may be able to give you good rates. People with bad credit may be able to get better rates from a subprime lender or an auto loan broker.
It's easy to get quotes from lenders. There are online applications for a lot of lenders. Also, there are a number of online auto loan brokers. You can get pre-approved for an auto loan by just filling out an application. If you use a broker, you can get at least three or four different quotes from different lenders. Choose the best loan deal after you've looked at the quotes.
