Debunking five common misconceptions about applying for a car loan
What are common misconceptions about applying for a car loan? originally appeared on Quora: the place to acquire and share knowledge, allowing people to learn from others and better understand the world.
Answer by Gurpreet Singh, managing director of auto loans at Credit Karma, the Quora:
Financing a car can seem like a daunting task, but it doesn’t have to be. Do your research and arm yourself with the information you need to make informed decisions and avoid falling into pitfalls. Debunking common misconceptions about getting a car loan is a good place to start. Some include:
You don’t need to shop. Comparison shopping allows you to get the best deal by weighing a few different quotes, which sometimes translates into bargaining power. When evaluating your different options, focus on the total amount you’re paying, not just each month. Account for fees, interest and a deposit.
Getting pre-approved from multiple lenders will cause multiple credit issues. Some lenders will apply a firm credit application in order to approve a consumer for a loan, however, this does not mean that your credit will be checked multiple times. The trick is to shop within two weeks, as lenders should be aware that multiple auto loan applications within a specified time frame means the consumer is shopping around. However, stay diligent and check your credit regularly to make sure you don’t miss anything.
Getting approved for an auto loan means you can afford to buy the car. Getting approved to borrow a fixed amount for a new car is an important step in the car buying process, but make sure you can actually afford the total cost of car ownership. Beyond budgeting for a down payment and your monthly loan payments, you’ll need to make sure you have cash set aside for car insurance, maintenance, repairs, and record car prices. essence. Next, think about other financial responsibilities you have on the horizon to make sure you have enough money set aside to cover bills and necessities.
You can’t get a car loan with bad credit. While it’s possible to get a car loan with bad credit, as a general rule, the lower your credit score, the higher the interest you’ll pay. My main recommendation for those with poor credit in the market for a car would be to put off your purchase until you can get your credit, but knowing that having a car is a necessity for so many people, there has a few things you can do:
- Save for a larger down payment, as this will reduce the amount you will need to borrow and, therefore, you will pay less interest.
- Apply with a co-signer who has a strong credit history.
- Look for the best possible deal and look for lenders selling to consumers with bad credit. Credit Karma outlines a few options worth considering.
If a dealership tells you they’ll pay off your current car loan before financing a new one, be skeptical and ask questions. A dealer tactic to be careful of is that some dealers may try to mislead you by announcing that they will pay off your car loan, before funding a new loan, but they are in fact just bending the negative equity. in your new car loan. It can also put you in a situation where you borrow more money than your new car is worth, putting you at high risk of being upside down on your loan.
That question originally appeared on Quora – the place to acquire and share knowledge, allowing people to learn from others and better understand the world.