Learn These Answers before You Go Finance a Car

Other than your home, the automobiles that you purchase are probably your largest purchases. When you are ready to go and finance your next car, you should know the answers to these questions, which are some of the most commonly asked questions when it comes to car loans.

What are Some Ways to Reduce My Interest Rate?

One of the best ways to reduce the interest rate on your car loan is to get multiple quotes before you decide on what car loan to take. Get these quotes prior to setting foot on the lot at the dealership. Car dealers make a great deal of money in the financing department, partly because they often bump up the interest rate that the bank gives them in order to make a bigger profit. Also, check your credit report prior to loan shopping. You may find out that there are mistakes on your credit report that you can easily fix. If you have been late on payments recently or are maxed out on your credit cards, you may want to wait a few months, making on time payments and paying down your credit cards, if you want to improve the rate that you get on your car loan.

How Long Should I Get a Car Loan For?

You should try to get a car loan for the shortest time period possible while still being able to afford the payments. Shorter payback periods usually come with lower interest rates. Even at the same interest rate, taking longer to pay off your car means that you'll pay more interest over the life of the loan. Ask yourself how long you intend on keeping your car. Try to get a loan that will allow you to pay off the loan before you plan on getting your next car. This will keep you from having to roll over negative equity into your next car loan.

What Should I Look Out for When Signing a Car Loan?

When you are signing a car loan, you want to make sure that you read the fine print on the loan very carefully, especially if you finance through a dealer. In particular, check to make sure that your loan hasn't had credit life, disability, or GAP insurance added that you don't want. If you want GAP insurance, you can purchase it from a third party for less. Make sure that the interest rate, amount financed, and term of the loan is what you were promised. If you are financing through a dealer, get a written statement that your loan has been approved by the bank before you take possession of the car. You don't want them calling you up the next day telling you that they couldn't get you financing at the rate they promised, but they can get you a loan at a higher rate. If you have a trade-in that you still owe money on, get a written note from the sales manager stating that they will pay off the trade-in promptly, and make sure they give you a date when the trade-in will be paid off. While most dealerships are staffed with honest people, not all car salesmen are trustworthy, and you want to avoid getting ripped off.