A Beginner’s Guide to Auto Financing

It’s definitely a lot more interesting to shop for a brand-new car than it is to shop for an auto loan. That’s why auto financing is one of the last things many vehicle buyers think about — when, in fact, it’s something that needs to be done first. Of course, finding the right car for your budget and needs is important, but figuring out how you’ll pay for it and picking the right financing option is just as important during your car-buying journey.

Few car buyers can afford to purchase a car with cash. If you’re like most people, you’ll likely want to get an auto loan to cover either the entire cost of the car or at least a part of it. The process may seem daunting to you if you’ve never applied for an auto loan before. Worry not — we’ve put together this guide to help you navigate the process with ease.

Learn the Lingo

Before you begin researching auto financing options and comparing rates, you’ll want to learn what terms like interest rate, APR, down payment, credit score, vehicle title, etc., mean. This will make it easier for you to compare loan offers.

Know Your Credit Score

A good credit score means you are more likely to be offered a competitive rate of interest by the lender. So, before you walk into a lender’s office, check your credit score. If your score is lower than you expected it to be, consider working on improving your financial situation before applying for a loan.

Find a Good Deal

Research financing options online and pick the best loan offer you can find. This step may require a bit of research, but if you compare loan options offered by banks, credit unions, and other financial institutions, you’re likely to find an offer with generous terms.

Choose the Shortest Term Possible

In general, you want to always pick the shortest term you can afford when getting a loan. This way, you’ll be able to pay off the loan faster, and you’ll owe less in terms of interest.