Getting a car loan on the cheap is the Holy Grail of car buying. We like to know we got a good deal, but sometimes with auto loans we really don’t know if we are getting the best possible price. There are ways to increase your chances of getting cheap car loans. Here are three things you can do to save money on your auto loan.
1. Check your credit score.
Knowledge is power, and when you know your credit score, you have a better idea of what kind of interest rate you can get on your car loan. You would be surprised at how much a one or two point reduction in your interest rate can save you. When you don’t know your credit score, it makes it easier for dealers to bamboozle you. They can add a couple of points to the rate offered by a finance company, and then pocket the difference. But if you know your credit score going in, you can avoid this sort of behavior by knowing the interest rate you can expect. Don’t be afraid to walk away if the interest rate is too high. Chances are you can find that rate again (or lower!) somewhere else.
2. Get pre-approval from a bank or credit union.
If you have decent credit, you can get financing from your bank or credit union. Banks and credit unions often charge much less in interest rates than dealer financing. Additionally, you can go through an online car lender to get pre-approval for a car loan. Internet car lenders often offer discount interest rates, and they will send you the money to buy the car. A pre-approval from a bank or credit union will also give you a good idea of what you can afford in terms of car payments.
3. Use your HELOC to finance the purchase.
If you have enough equity in your home, a home equity line of credit (or HELOC) can help you get a cheap car loan. Basically, you buy your car with funds borrowed against your home. Most HELOC loans have interest rates that are lower than the lowest of auto loan rates. You can save money by using your home as collateral for your car. Watch out, though. If you do not make payments, you could lose your house.
Getting a cheap car loan is possible, especially if you have okay to good credit. Shop around for the best interest rates, and take the steps necessary to educate yourself on the process before you begin car shopping.
View our Recommended Car Finance Companies at Car Loan Sense to save money with your next car loan.