When buying a car, there are several different factors you need to take into consideration – finding the right style of car, deciding whether to buy used or new, narrowing down on something in your price range, and getting a loan for the chosen vehicle. While no part of this is easy, getting a loan can really throw a wrench into things.
The biggest challenge you’re likely to face when trying to get a loan is that of excessively high loan rates; people get gouged on loans all the time and it can be for any of a number of reasons.
How do you know if you’re paying too much for your auto loan? These 3 factors are common indicators that you could be getting a better rate.
You Got Your Loan At The Dealership
Unless you’re buying your car from an individual, you’re probably already at the dealership, so why not work with them to get a loan? For one simple reason: you won’t get a good rate.
When the finance manager at the dealership contacts lenders, he’ll give you a loan from whatever lender gives him the biggest commission. This is almost never the loan that’s best for you, but since you’ve entrusted the decision into his hands, you’ll never know it. Instead of letting the dealership take control, use your phone to look up loan rates, contact your primary bank, or come prepared with your own loan connection.
Check Your Credit Report
Before you apply for a loan, you’ll likely check your credit score, but if you don’t also order your credit report, you’re leaving yourself open for problems. Though it’s likely unintentional – the result of a glitch or oversight – many people have errors on their credit reports. Get a copy of yours and review it.
If you notice any problems with your credit report that may be weighing your score down, be sure to address them immediately. A better credit score equals a better interest rate on your auto loan. Give yourself time to get things corrected, however, as it can take up to 30 days to get complaints investigated.
Sometimes you’ll find yourself paying too much for your auto loan because of your financial past – not your present – and the only solution to that is to try to refinance your vehicle. This is the best thing you can do if you’ve been paying into a loan for a while and are also actively working to improve your credit. If you got your loan at a time when you had limited credit history or a lot of debt and you’ve since corrected that, you might be able to get a much better rate.
Like most other loans, if you get a poor rate on your auto loan, you’ll ultimately pay far more for your car than you should – and no one wants that. Avoid being overcharged by taking an active role in choosing your lender and comparing loan rates/refinancing when it seems appropriate.
Don’t stand on the sidelines and let lenders pull one over on you with a terrible rate.