Auto Loan

Are you looking to obtain a car loan? Here’s what to know and how to get one

Are you looking to obtain a car loan?  Here's what to know and how to get one

If you’ve decided it’s time to buy a new car, you’ve probably already researched the model, color and features you’d like it to have – but don’t forget the cost and options. car loan before you go to the dealership.

This content is sponsored by PenFed Credit Union.

If you’ve decided it’s time to buy a new car, you’ve probably already researched the model, color and features you’d like it to have – but don’t forget the cost and options. car loan before you go to the dealership.

To get a car loan at the best interest rate, it’s important to shop around with lenders, get pre-approved and check your credit score before you go to the dealership, the experts at NerdWallet said.

“Don’t apply for a car loan without checking your credit report first. If there are errors or incorrect information on your report, such as fraudulent activity, you could be denied a loan or only offered a very high interest rate,” NerdWallet reported.

You can get a free copy of your credit report every 12 months from each of the major reporting bureaus such as Equifax, Experian and TransUnion at AnnualCreditReport.com. If you spot errors or evidence of fraud, you can file a report to dispute it and have it corrected before applying for a car loan, NerdWallet noted.

Next, it pays to figure out how much to borrow and what you can afford. How much can you afford for the monthly payment? How much can you deposit? How long of a loan would be best for you? There are all the right questions to ask when determining expenses, Business Intern reported.

PenFed Credit Union has an auto loan calculator that can estimate your costs based on purchase price, down payment, loan term, interest rate, and more. check it out here.

Once you have your credit score and your budget for the car, you can move on to researching car loans from different lenders. Business Insider noted that credit unions, banks, and online lenders are good places to look. Dealerships also offer financing, but you might want to reconsider the dealership’s offer, said John Van Alst, attorney at the National Consumer Law Center. on NPR. He said the dealership is allowed to increase the rate they offer you above what you actually qualify for.

In your search, compare quotes from lenders to find the best deal for you.

“Your own bank or credit union may give you a preferential rate, especially if you accept automatic loan payments from a checking account there,” NerdWallet reported.

Once you have narrowed down the list of lenders, apply for pre-approval – the way the bank conditionally says they will lend you money. With pre-approval, a lender reviews your credit report and other information to determine the loan amount and rate you are likely to receive.

“You can be pre-approved by as many lenders as you want – you’ll want to check with a few lenders to compare the interest rates they offer,” Business Insider wrote, noting that after comparing offers, you can accept the one you are satisfied with.

Getting pre-approved slightly lowers your credit score due to the thorough investigation, PenFed Credit Union experts say. You may want to shop around and get pre-approved from many lenders, and as long as you get those pre-approvals within 14 days, your credit score is only affected once, adds PenFed.

Now comes the fun part – choosing that new vehicle! But consider any limitations of the loan offer, recommends NerdWallet. For example, are certain brands excluded? Are there any requirements for dealers? Or are there time restrictions on how long the loan can be used?

Don’t forget to take it for a test drive — and focus on cars within your budget, Dianne Whitmire, who sells cars at a Toyota dealership in Los Angeles, told NPR. This means that you might want to find a salesperson who is okay with showing you a bunch of cars and not being too pushy to get you to buy a more expensive car. Whitmire added.

Once you have chosen the car, choose and finalize your loan. NerdWallet recommends checking to confirm there’s nothing sneaky about the contract like hidden fees, longer loan terms, add-ons you didn’t ask for, or a prepayment penalty.

All you need to do is drive your new wheels on the road and make sure you’re ready to make your payments on time. Autopay can be set up through your lender online or over the phone, and some lenders offer a small discount on interest rates when you sign up for these autopays, Business Insider reported.

NerdWallet noted that there may also be additional benefits to automatic car loan payments.

“Taking the time to do this helps you establish an on-time loan repayment history, an important factor in your credit score and your ability to secure a loan with better rates in the future.”

Find out more about auto credit at PenFed Credit Union website. With PenFed Credit Union, you can refinance your car loan with another lender and earn a $150 bonus. This applies to refinance loan applications funded between February 12, 2022 and March 15, 2022. Learn more here.

PenFed Credit Union is federally insured by the NCUA.