Summer is a great time to purchase an automobile. A new or used car can be fun for a luxurious drive or for prospective college students who will need a way to get around campus. Finding the right financing for a car is an intricate process. Some loans could have high interest rates and hidden fees, which will make repaying the loan difficult and possibly impact your credit score. Here are a few tips to help you properly finance a car purchase and keep your score intact:
Determine if you can afford a car
Before you head out to the dealership to find your dream car, determine how much you're willing to spend. You will need to factor in fees, such as vehicle registration, car insurance, documentation and dealer fees. Be sure that you can afford everything because late payments can negatively impact your credit score.
Pick a financing route that works for you
Once you have determined that you can afford a car, it is time to choose where you will get your financing done. You can either get a loan through the dealership or with a financial institution such as a bank or credit union. A contract with a dealership could be retained by the dealership, but they could sell it to an assignee, which is typically a bank or finance company. Make sure that you know if the contract is going to another party and you have the proper contact information so you can make your payments on time. You don't want your credit score to be affected because you're not sure who you have to make a payment to.
Applying for a loan with a bank or financial institution is common. Like any type of loan, you will need to make sure that your finances are in tip-top shape to get approved for financing with a good interest rate. Continue to make your credit card payments on time, pay down all your debts and run your credit report to make sure that there are no mistakes on it. Keep in mind that you don't need to say yes to the first loan offer you get. Try to shop around and see if you can get a better rate. If you have looked and are not happy with your options, hold off on buying for now and try to repair your credit score.