Many people assume that financing a used car is not as easy as financing a new one. But, it doesn’t have to be this way. Here are a few things you can do to increase your chances of being approved for a used car loan.
Know Your Credit Score
Unlike getting a mortgage, you can get a car loan even if your credit score isn’t good. The only issue is you will be charged a higher rate of interest. Low-interest rates on loans are only for people with a FICO score of at least 700. So, check if you have a decent credit score before you walk into the dealership.
Get Several Financing Quotes
You should get quotes from every lender who is willing to give you a used car loan. Then, compare their terms, including the amount of loan they are willing to give you, the duration of the loan, and the interest rate. Choose the best option.
Keep the Loan Term Short
Although you will be paying more on a monthly basis if you get a short-term loan, you will benefit eventually as your loan will get paid off faster. This, in turn, means lower interest charges over the lifetime of your loan.
Pay as Much as You Can for The Down Payment
Pay at least 20% of the total price of the car as the down payment. This will help you borrow a lower sum and you’ll owe the lender less interest as well.
Pay Associated Costs/fees in Cash
Charges like the dealership fees, documentation fee, sales tax, etc., should be paid in cash. Don’t roll these fees into your loan. The dealership will more than likely be happy to add this to your loan, but why would you want to pay interest on these fees? So, make sure to pay in cash for all the extra charges.
Get a Co-Signer
If you’ve just started earning, you may have little or no credit. Even if you currently have a secure, well-paying job, the interest rate applicable to you may be quite high due to the fact that you don’t have a reliable credit history. If this applies to you, try to get a co-signer who has a good credit history. This will definitely ease your interest rate and lower your monthly cost.