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4 min read published September 20, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of borrowing money to purchase the car they want.







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances through providing concise, well-researched, and clear facts that break down otherwise complex subjects into digestible pieces.









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Credit score, vehicle you purchase and the credit score of your lender all play an important role in the price you pay for your auto loan. The best lender to get a loan from will require numerous applications and extensive research before shopping. But getting preapproved gives you more leverage when it comes to negotiations in the car dealership and it could help you get a cheap car loan which can save you hundreds worth of money over the loan time. 5 steps to obtain an affordable car loan Be prepared to shop with a clear understanding of your budget and credit score, as well as the ideal loan time. These steps will you find an affordable and, hopefully, affordable --- lender. 1. Know your budget Experts recommend that you limit your spending to 20% of your total per-month income for auto loan expenses, including each month's loan payment, fuel and other associated costs. (The recommended limit for both new and used vehicle payments is 15 percent and 10 percent respectively.) Ideally, you'll go into an auto showroom with a clear plan of what you'd like to buy, with the extra . Stay within your budget while finding a car that meets your requirements. Make use of sites such as Edmunds as well as Kelley Blue Book for car cost and reliability estimates. Interest rates on new cars are usually lower than those on but used vehicles typically cost less in total. 2. Check your credit report Lenders take your credit score heavily when evaluating your ability to repay a loan. The higher your credit score will lower the interest rate. If you're looking to secure the most favorable rate that the lender provides, a high score is usually necessary. You can obtain the credit scores and past history by contacting Equifax, Experian and TransUnion or for free at . Try and get your credit rating in the highest possible condition before trying to get an auto loan. Some ways to include filing disputes with credit bureaus. If you find any errors regarding your credit score, file disputes with the appropriate credit reporting agency immediately. Negative information in your credit report incorrectly reported could lower your credit score downwards. Being current with any past due debt balances. Payment history accounts for the 35 per cent of your score on credit it's crucial to bring any outstanding accounts up to date and make timely payments on all outstanding debts moving forward. Reducing your unpaid debt balances. Aim for a credit utilization rate to 30 percent or less to increase your credit score. Also, you can lower the rate of credit utilization. Beware of new credit applications. Refrain from applying for other types of loans or credit cards. Multiple hard inquiries in the same time frame could affect the credit rating. 3. Apply to multiple lenders. Although many lenders utilize the same factors to determine the interest rate they will use, they apply these factors differently. The best way to find the most affordable rate based on your credit is to apply to multiple lenders. Find out information from a handful of banks, credit unions, or online lenders and then compare their interest rates. Shopping around will give you an idea of what's available. And once you have an idea of what you qualify for, you will have an idea of what your monthly payments will look like. Plus, if you do want to , you can negotiate with an existing backup plan in place. 4. Make an application for loans within 14 days of the date you apply. Every credit application you make results in an investigation into your credit which lowers the credit rating by just a couple of points. The inquiry remains on your credit report for up to 2 years. The impact of hard inquiries can affect your credit score for up to 12 months. This makes several applications during a brief time frame detrimental to your credit score. Fortunately, an exception to the rule applies for auto loans. All loan applications made within a 14-day window count as one inquiry, minimizing the impact on your score. Keep in mind that loans made after this timeframe could cause a more significant drop of your credit rating and render you unqualified for the best rates. 5. Take the time to calculate Although the low annual percentage rate (APR) is attractive however it's not the only thing to be concerned about. The trade-in value of your prior car, as well as your and the amount of it that is incorporated into your total price of your new vehicle. After all, the more you can pay upfront (and the lower interest you'll pay in the long runthe less expensive your vehicle loan can be. Use an to help determine the total amount of interest you will pay and your monthly payment. It's an excellent tool, particularly when you've prequalified with multiple lenders and understand the rates to expect. The majority of car loans are available with terms of 24 to . And while a longer term means a lower monthly payment however, it is more expensive overall due to the interest. Pick the loan that has the shortest time you are able to manage to reduce the cost. Where can you find the most affordable car loan Dealerships partner with banks, credit unions along with online lender to provide you financing. If you want to get the lowest cost car loan it is important to not pay extra interest for a similar loan. Banks: If your have an open account with a financial institution, you can look at Auto loan. You might be able to get a discount for a relationship in addition to a competitive interest rate. And because the majority of dealers use banks to finance their business they will provide the same services . Online lenders: Since online lenders compete with banks and credit unions in order to compete, they typically have similar rates. The best part is that they work with borrowers with some credit history, which makes them the best option to get a cheap loan even if you don't have an extensive credit background. Credit unions: As they're non-profit, they typically provide competitive rates and similar loan terms as banks. This means that they're among the cheapest ways to get an auto loan. But since you need to be an active member, it could require a couple of monthsand an active account -- before you're able to apply. The next step is to apply for a car loans are one of the largest expenses that people face, so put in the work to find the lowest cost car loan that you can. Find out the monthly payments and the total loan amount you are able to afford before signing off on the purchase of a new car. Do your research and apply to multiple lenders to ensure that you're getting the best deal. Find out more


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Writen by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the details of borrowing money to purchase the car they want.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances through providing concise, well-researched, and well-informed data that breaks complicated topics into bite-sized pieces.






Auto loans editor




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