Getting Used Car Loans: The Ins and Outs
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Getting Used Car Loans: The Ins and Outs

Getting Used Car Loans: The Ins and Outs

You’ve been eyeing that classic (or not-so-classic) car for some time now, but you are too cash-strapped to complete the purchase yourself. What do you do? Look into used car loans! Follow these tips to get your wheels. Pretty soon, you’ll be driving in style!

Consumers who purchase used car loans should always do their research. They should also be observant when they decide to take out a loan. There are plenty of con artists around just waiting for you to walk through the door. Here are some tips to out-maneuver the vultures.

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Have everything ironed out before you buy your car

Loans generally point you in the direction of how much you can spend on your wheels. Be sure to already have the loan approved before you buy your dream car.

Check every source

Used car loans are available from many sources. Credit unions and banks are the best options because they usually have the lowest interest rates.

You can also find loans for used cars from the dealer or manufacturer of the car but proceed with caution. The best option, however, is to find the loan through an online bank. Online banks have lower interest rates than do regular banks.

Another plus is the fact that online banks usually don’t charge application fees, there are no repayments and obligations, and an option for refinancing is also available.

Find a suitable interest rate

Okay, you have searched all of your sources. Did you find a suitable interest rate? Of course, you should be looking for the lowest interest rate you can find for your loans. Once you agree on a rate, have the lender pre-approve the proposed interest rate for safekeeping.

Start negotiations

Remember, car dealers can also finance loans for used cars. When you find the car dealer of your choice, discuss the interest rate with him or her. If the salesman can beat your pre-approved interest rate, let the car dealer finance the loan, but it should be a simple interest agreement. If the dealer cannot oblige, then “fall back” on your prior pre-approved agreement.

Check your contract carefully!

Dealers or lenders may sneak add-ons into your contract. Hidden fees may be calculated to “beef up” contracts on loans for used cars. It is recommended that potential buyers calculate the monthly payments on their loans to prevent this common tactic.

Check your future car’s model

Many used car loans are contingent on the car’s year of production as well as the model of the car. Usually, a car about 15 years old or newer is easily approved for a car loan.

Older models may pose a problem. The lender will only approve these cars on a case-by-case basis.

Research down payments

Some lenders require that consumers put a down payment on their loans, but some do not. Usually, when a down payment is charged, the rate is 10 percent. Check all of your options!

Check your credit report

Consumers must always check their credit reports before securing loans for used cars or other purchases and investments.

Dealers are familiar with your credit, so you should be too. If you’re not intimate with your score, the dealer could easily say that you have bad credit and could charge you out-of-pocket instead.

Pay off your credit card balances

If a dealer or lender sees that a consumer made no effort to pay off lingering balances, they will be hesitant to approve any loans for the used car you want to buy. If they do, it will most likely be at an outrageous interest rate.

No co-signing

Some people who want used car loans have less-than-great credit. So, they ask a close friend or relative to co-sign on the loan for them. The dealer or lender will insist that your credit will benefit, but he or she may end up signing your loved one’s name only.

Your credit will not be helped, and legally, you cannot even buy insurance for your dream machine; so if there’s a co-signer, make sure your name is in ink as well.

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