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

Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ins and outs of securely taking out loans to purchase a car.







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

Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to manage their finances by providing precise, well-researched and well-sourced facts that break down complex topics into manageable bites.









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Credit score, car you purchase, and the credit score of your lender all play a role in the price of the auto loan. Finding the most suitable place to borrow from is a process that involves numerous applications and extensive investigation prior to shopping. But getting preapproved gives you more negotiating power in the car dealership and could allow you to find a low-cost car loan that can save you thousands in dollars during the loan term. Five steps to get a cheap car loan Make sure you are prepared to shop by knowing your budget as well as your credit score and loan time. These steps can help guide you toward an affordable -- and hopefully inexpensive -- lender. 1. Make sure you know your budget Experts advise you spend no more than 20 percent of your net per-month income for auto loan expenses, including your monthly loan payment, fuel , and other related costs. (The suggested maximum for new and used car payment is 15 percent and 10 percent, respectively.) Ideally, you'll go into the showroom with a precise idea of , including the extra . Stay within your budget while finding a car that meets your requirements. Make use of sites such as Edmunds or Kelley Blue Book for car price and reliability estimates. Rates of interest on new cars tend to be less than on however used cars typically cost less overall. 2. Examine your credit score Lenders weigh your credit score when they evaluate your capacity to pay back a loan. The better your credit score, the lower the interest rate. And if you're trying to qualify for the best rate the lender provides, a high score is usually required. You can obtain the credit scores and past history from Equifax, Experian and TransUnion or for free at . Try and get your credit rating in the best possible condition before making an application for an automobile loan. A few ways to achieve this include dispute resolution with credit bureaus. If you notice any inaccuracies to your credit reports, file complaints with the correct credit reporting agency right away. Incorrect information in your credit report incorrectly reported could lower your credit score downwards. Making sure you are current on any past due debt balances. Payment history accounts for 35 % of credit scores it's crucial to bring any debts that are past due and to make timely payments on the outstanding debt going forward. Reducing your unpaid debt balances. You should aim to bring your credit utilization rate of 30 percent or less, to help boost your score on credit. It is also possible to reduce the rate of credit utilization. Beware of new credit applications. Avoid applying for any other type of loans or credit cards. Multiple hard inquiries within an unspecified time period can hurt your score on credit. 3. Apply to multiple lenders. Although many lenders utilize the same criteria to determine your interest rate but they do apply these variables differently. The best way to find the cheapest deal that is based on your credit rating is to apply to with multiple lenders. Get information from several institutions like banks and credit unions and online lenders and compare their rates of interest. Shopping around will give you a grasp of what is out there. And once you have an idea of the amount you're eligible for, you'll be able to get an understanding of your monthly payments will be. In addition, if you want to , you can negotiate with a backup plan already in place. 4. Apply for loans within 14 days of the date you apply. Every credit application you make will result in an investigation into your credit that dips your credit score by a couple of points and remains on your credit report for up to 2 years. Hard inquiries also impact the score of your credit for up-to 12 months, which makes several applications during a brief period of time detrimental to your credit rating. Luckily, an exception to the rule applies to auto loans. The loan applications that are submitted within the 14-day period are considered a single inquiry, thus minimizing the effect on your score. Keep in mind that loans made after this period could result in more of a decline on your score and render you unqualified for the most favorable rates. 5. Calculate the numbers Although an annual percentage rate that is low (APR) is appealing but it's not the only figure you should worry about. The value of the trade-in on your prior car, as well as your and the factor into how much you pay for the new car. After all, the more you can pay upfront (and the lesser interest you pay overall -- the cheaper your vehicle loan will be. Utilize an application to determine the total amount of interest you will pay and your monthly payment. It is a useful tool, particularly when you have prequalified with several lenders and are aware of the rates you can expect. The majority of car loans are available in the range of 24 to . And while a longer term means lower monthly payments but it will cost more overall because of the cost of interest. Choose a loan with the shortest duration you can reasonably manage to keep the total cost down. Where to get the cheapest car loan Dealerships collaborate with credit unions, banks and online lenders to provide you finance. To get the cheapest car loan, you should to not pay extra fees for the same loan. Banks: If you already have an account opened at a bank, check there for Auto loan. It is possible to get a discount for a relationship in addition to a competitive interest rate. Because most dealers use banks to finance their business, you'll get the same services . Online lenders: Because online lenders must compete with banks and credit unions in order to compete, they typically have similar rates. The best part is that they deal with borrowers with poor credit , so they can be a good place for low-cost loan in the event that you do not have an long credit history. Credit unions: As they're not-for-profit, they usually provide lower rates and comparable loan terms as banks. This means that they're among the cheapest ways to get an auto loan. However, since you must be a member, it may take several months- and an active account before you're eligible to apply. The next step is to apply for a car loans are one of the most expensive expenses people face and so you must put in the effort to find the cheapest car loan that you can. Determine the monthly payment and total loan amount you are able to afford prior to signing a contract for an all-new set of wheels. Do your research and apply to multiple lenders to ensure that you're getting the best price. Learn more


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Writen by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to purchase an automobile.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-researched, and well-informed information that breaks down otherwise complex subjects into digestible pieces.






Auto loans editor




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