If you’ve chosen to get an auto loan from a bank, you’re on the right track. Banks traditionally offer the best car loans in terms of rates and security in comparison to auto dealerships.
The secret to getting a loan from a bank is to be prepared and financially informed.
In other words, you’ll have to do some legwork before you actually fill out any loan applications. This will ultimately pay off as you will be in a good position to choose the bank and loan conditions that work best for you.
The best way to be informed about your credit history is to find out what your credit score is. A credit score is a number that reflects your past payment history (for example, if you’ve paid your bills and debts on time). The most popular credit score is called FICO (Fair Isaac Corporation). Banks use credit scores as a source of information to determine how reliable you will be to pay them back.
Banks are attracted to experienced and responsible borrowers. So, if your credit score is low, try to pay back as many debts as you can and arrange to pay back the rest in installments. Sometimes it is hard for young people to get a low bank rate for auto loans because they haven’t built up sufficient credit history to determine a good credit score. Which makes it difficult for the bank to know how much of a risk they are.
How much can you realistically afford to spend per month to pay back your auto loan? Factor in other car-related expenses you will have to budget for in addition, such as insurance, gas, parking and maintenance fees. The majority of auto loans are paid back monthly, so determine how much in your monthly budget you can allocate toward paying the loan back
You should also determine how much money (cash) you put down on the vehicle. This down payment will decrease the amount you will ask the bank to lend you.
Don’t think you will be groveling to a bank to lend you money. You are ultimately in the driver’s seat, because you have the choice of many financial institutions to choose from, which means they are competing for your business.
Make a list of the important information you need from banks about what they can offer you. This list will include interest rates, the life or term of the loan, conditions, such as if there are application fees or penalties to pay if you miss or want to make extra payments.
Search the websites of potential banks for answers to the questions on your list. Write out any outstanding questions you still have for each bank. This will show loan officers you are an informed and cautious consumer.
Meet with loan officers from the banks you are considering. There is no charge for these meetings. (Remember, banks want your business.) You will make a good impression with your knowledge of your financial history, budget, and specific questions you have for the loan officer.
Once you’ve decided on a bank at which to apply for a loan, you will be asked to fill out an application. Be honest and accurate when filling it out. Not doing so will ruin any potential lending arrangement and could lead to criminal charges.
Don’t be discouraged if your application is denied. As you may have discovered in your preparation, there are other banking institutions out there looking for your business.
