Everything You Need to Know About Car Finance

When you're out there looking for used car financing rates, a host of tips can help get the best rates on a used car loan.

• Pull your credit.The first step in securing good interest rates is to get your credit reports from all three credit agencies and know your FICO credit score. Lenders generally go by these scores, and customers who know what their credit risk is can demand the interest rates they deserve
• Do "credit fixes".Pay off any outstanding judgments on your credit. If you lack a positive credit history, do quick fixes like opening up lines of credit to boost your FICO score and get you eligible for better interest rates
• Avoid "low monthly payment" offers.Interest rates are what make all the difference in a used car financing deal. Always ask for fixed rates with a low APR or interest rate and don't be fooled by "only X dollars a month"
• Bypass the dealer.Remember, in terms of used car financing, the dealer is the middleman. Talking directly to third-party lenders can often get you better interest rates
• Seek preapproval.Getting approved for a loan before visiting the dealer's lot gives you extra confidence, and allows you to avoid the hassle of trying to combine a car purchase with a financing negotiation
• Look for involved lenders.When you are seeking a bank or credit union to finance your used car loan, make sure that particular lender is in the business of doing car loans for consumers. If not, they probably don't have the best rates available
• Consider a cosigner.For those with bad credit who have been told they only qualify for high interest rates, a trusted friend or family member can stand in as a cosigner. However, it's imperative to have a good understanding of how the vehicle will be paid off, and to be vigilant about the paperwork to make sure the lender doesn't "switch" and get the cosigner to appear as the primary borrower
• Look into secured loans.If you need a new vehicle but don't quite have the cash, secured loans can get you better interest rates. A secured loan is a loan backed by collateral: you can use an existing car as collateral, or take out what's called a home equity loan or home equity line of credit (HELOC) for the car loan amount. Either way, remember that the property that you used as collateral is now up on the block for the lender to take in cases of nonpayment
• Get a short-term loan.Some shorter term loans are at lower interest rates. Look at what benefits you as a borrower in the long run
• Increase your down payment. A larger down payment decreases the amount you need to finance, and shows lenders that you're serious about paying off the debt