Before you leap into the car loan application process, there are several important steps to understand. Knowing the process will help you navigate it with confidence, and ensure you get the best results for your unique situation. The following steps will help you understand what matters, what you need to do, and how each step of the process fits with the others.
Step 1: Know Your Credit Score
Your credit score is a great indicator for how the rest of the car loan application process is going to go for you. Having a clear understanding of what your credit score is, and what this score means in the context of applying for a car loan, is crucial to a stress-free experience.
Your credit score is basically a number outlining your reputation with creditors, and will be used by lenders to dictate the kinds of interest rates that will be available to you for your car loan. Knowing it not only allows you to set your expectations, but also gives you the opportunity to improve it if need be, resulting in better interest rates in the long run.
Step 2. Know Your Budget
Figuring out how much you have to spend on a car loan involves parsing out several different factors. These include:
- How much you can afford to pay over the life of the loan
- How much you can afford to pay each month
- How much interest you will pay at given rates
Once you have an understanding of these different numbers, you will have a more comprehensive grasp on your total budget. This will allow you to outline your car options, and keep you from overspending in a way that could harm your finances in the long term, and your quality of life in the short term.
Step 3. Get Your Pre-Approval
Pre-approval is a lesser known part of the car loan application process, but it is something that helps put you in the right car for your financial status. Pre-approval gives you the status of a cash buyer, which strengthens your negotiating position with the dealership you buy your new car from. This is because the dealership has confidence that you have the financial backing to get into the car you’ve been pre-approved for, and that your financial status has been well-vetted by an appropriate agency.
Step 4. Pick Your Vehicle
Once all of the loan application process is out of the way, and you’ve been pre-approved for a loan, it’s time to get you into a new car. Your Canadian Auto Brokers finance specialist will help walk you through your options to find you a vehicle you love. By diligently following these few easy steps, you can ensure that you get the best car loan for your financial situation, so that you can feel comfortable in your new car, and not worried about your financial future.