The car loan process

Here are five basic steps you are likely to take when applying for a loan for your new vehicle.

1. Determine what you can afford

Get a piece of paper and create a realistic budget that tells you what you can afford in monthly payments. Then decide on the term of your loan. Then determine the amount of deposit you want to make. The result shows you how many cars you can buy.

2. Check your credit score

It is important to know exactly what your position is in terms of credit rating before talking to lenders. Lenders rely on credit reports and ratings to determine interest rates and loan terms. The higher your credit score, the better your position for setting a lower interest rate.

3. Compare prices to get the best loan deal>

This is important because interest rates and conditions vary considerably from one lender to another. It is also important to research the best loan offer before purchasing a car.

4. Obtain approval

When you get pre-approved for your loan, you’ve set your limits before entering a dealership showroom where your emotions can make the most of you and your pocket. However, the best places to look for a pre-approved loan are banks and credit unions.

5. Buy your car

Now is the time to visit your local car dealer. Find exactly the car you want. Then tell your lender the year, make, model and vehicle identification number. You should also purchase auto insurance as soon as possible. In most car dealerships, you cannot drive without proof of car insurance.

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