Best Auto Loan Financing Tips
April 23, 2006
Without transportation, commuting from school, work, etc would be an everyday hassle. In cities where public transportation is widely available and utilized by the masses, finding a way to get around town without a vehicle is likely a cause for little concern. On the other hand, individuals who live in suburban or rural cities with limited public transportation need a reliable automobile.
When purchasing a new car, car buyers have two options. They may either choose to finance the vehicle for a fixed number of months, or purchase the car with cash. The latter choice is highly recommended and alleviates a monthly car payment. Realistically, the majority of buyers who enter the market are unable to pay cash for a vehicle purchase. Thus, many make the choice to finance a car, and search for the best auto loan rate.
Although the finance process is seemingly simple, car buyers must consider several factors before signing on the dotted line. Each day, thousands of car buyers get scammed into accepting a loan with bad terms. Moreover, getting hit with high interest rates is a common problem. Fortunately, there are certain tips and techniques that will help buyers obtain the best auto loan.
Prior Credit History
The majority of people who finance vehicles have previous credit history, thus lenders have little difficulty establishing an interest rate. In this case, individuals with good credit and low debts may get approved for the best auto loan rates, whereas applicants with high debts and a low credit score may receive a higher rate.
There are loan programs designed to help people with no credit history. Yet, if you are looking for the best auto loan possible, apply for a major credit card or retail card. Secondly, open a bank account. Maintain a good standing with creditors for at least six months. This should provide ample time to boost credit score and prove credit worthiness.
Keep Debts Low
Many buyers assume that as long as they pay their bills on time, their credit score will remain high. However, this is quite the opposite. The more credit cards and consumers loans you open, the lower your credit score. When applying for an auto loan, lenders will consider your overall debt load. Carrying several thousands of dollars of debt with a modest income will make a lender nervous. If possible, outline a plan to reduce debts before applying for a loan. Keeping debts at 50% of the credit limit is good; however, 25% will greatly increase your credit rating.
Maintain Job Stability
Stability is a key factor in applying for any type of loan; however, many people will underestimate its value. Buyers with a recent history of job hopping or having long periods of unemployment are not ideal loan candidates. In a lender's eyes, this type of person may suddenly decide to stop working and default on the loan. To avoid this common problem, college grads and individuals relocating to a new area should maintain the same employer and address for at least six months before applying for an auto loan.
About the author or the publisher Valencia Higuera is a freelance writer from Chesapeake, Va. The Old Dominion University graduate has a degree in English with an emphasis in creative writing and journalism. Writing credits include non-fiction articles for print and online publications.
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