For most people, buying an automobile will require some sort of financing. This financing may be offered by the automobile dealership or through your personal bank or credit union. No matter where you seek your financing, proper understanding is key to avoid costly mistakes. By learning the truth behind these common myths, you will understand the process of applying and securing a personal auto loan to purchase an automobile.
Perfect Credit Is Mandatory
Many people believe you will not qualify for an auto loan unless you have perfect credit. Fortunately, this is not true, especially since most people do not have perfect credit. There are many programs available for individuals who have less-than-perfect or even "bad" credit, so it is smart to know your options.
For example, certain lenders will approve your loan as long as you are purchasing a vehicle under a certain amount. While the interest rate may be higher than what you hope, the loan option can still help you purchase the vehicle you need.
A down payment may be requested by certain banks and lenders to qualify you for the loan. Putting money down on the purchase will not only help with the approval — it will also reduce the total amount you need to finance, which will lower your monthly payment.
Rates Are Non-Negotiable
If you are approved, whether through your bank or the dealership's finance department, you may believe the interest rate and terms are non-negotiable. Again, this is not true. You always have the option of negotiating a better deal.
Discuss all options with your personal bank, making sure they understand you have a long-term relationship that you hope to continue. Ask if placing money down on the vehicle will offer you a better deal in terms of interest rates. A shorter term may also be an option to consider since some banks will offer better rates for individuals who finance for a shorter period of time.
If you are financing through one of your dealer's banks, negotiating is also possible. Most of these dealership financing deals will have higher rates to increase profits. Ask the dealer about rebates, which can lower your financing amount, and if there are any special financing offers available on certain makes and models.
Financing a car, truck, or SUV does not have to be a challenging process. With this guide and a bit of patience, your vehicle loan will be successful and affordable.