Clean Credit, Shopping Around, and Improving Your Rates

When you are ready to purchase your next automobile, you want to pay as little as possible. While finding a good dealer that is ready to sell you a car at an inexpensive price is important, your automobile loan is another important part of the car-buying equation. Many car loans will take between three and five years. Over that period of time, the interest that you pay over the life of the loan can make a big difference in your overall cost. You want to do everything that you can to make sure that you are getting the best auto loan rate for your purchase.

Clean Up Your Credit

When it comes to deciding on an interest rate for your automobile loan, there are two items that banks factor in. Interest rates for every buyer are partly based on the prime rate, which you have no control over. You can, however, control your credit score. Because a poor credit score will make lenders think that loaning money to you might be risky, you want to do whatever you can to clean up your credit before shopping around for the best auto loan rate. One of the first things you should do is obtain a copy of your credit reports from the top three credit reporting agencies. Make sure that there are no errors on the reports. If you do see an error, you can send a letter to the credit reporting agency to ask them to correct it. Be sure to send your letter through the post office using certified mail, with a return receipt requested. For more information about disputing errors on your credit report, you can visit the Federal Trade Commision's web site. If you have any recent late payments, you should make sure that you pay particular attention to paying all of your bills on time. Recent late payments can have a huge effect on your credit score, which can raise your rates.

You Better Shop Around

When you arrive at the car dealer in order to make your automobile purchase, the dealer will probably be more than happy to find a lender that will loan you money to pay for one of the cars on their lot. Their job is to sell cars, and as long as someone will loan to you, they will sell a car to you. The rate that the dealer will offer will not always be the lowest. Shop around before you go to the dealer in order to find the best auto loan rate. At our web site, we can help you compare quotes from different lenders.

Thinking Long Term

Another way to save money on the overall purchase price of your car is to think with a long term mindset. If you are able to come up with a larger down payment, you might be able to get a more favorable interest rate for your automobile loan. You can use the time that you take to save up for your down payment as time to concentrate on making on-time payments and improving your credit score. If you are able to make a larger monthly payment, try to get a loan for a shorter period of time. Interest rates for 36-month loans tend to be lower than interest rates for 48 or 60 month loans. A larger down payment and shorter lending period may require more of a sacrifice today, but it is better for your pocketbook in the long run.