Your First Car Loan

Financing a new or previously owned car for the first time may seem like a scary experience. It will be less scary if you know what you're doing before you step foot in the financing office of the dealership.

Know your credit score
If you don't already know your credit score, then find it out by ordering it from one or all three of the credit agencies (Experian, TransUnion and Equifax). Your credit score plays a huge role in whether or not you get car loan approval and it's also a factor in the interest rate and term (length) of the loan you can get. Shoppers with higher credit scores (usually above 700) get lower interest rates than those with lower credit scores.

Comparison Shop
As you would with any major financial purchase, you should shop and compare at least three auto lenders before going with one of them. Interest rates can vary from lender to lender and you want to make sure that you're getting the best deal possible--no matter what your credit score is.

Shop with approval in hand
It's possible to get pre-approved for an auto loan before you've even started shopping for the car. It's also a good idea because it gives you a price range to stick with. This prevents a crafty car salesman (or woman) from up-selling you into a more expensive vehicle than you may not be able to afford. Pre-approval also cuts down the time you have to spend at the car dealership while the finance department pulls credit and tries to put together an auto loan through the dealership.

It can also give you some negotiating power. Some dealerships offer cash rebates or low interest rate financing. If you already have low interest rate financing setup for your auto loan then have the opportunity to take advantage of the rebate--and you'll still get a low interest rate from the original lender.

Shopping for a car loan isn't brain surgery by any means, but if you're prepared you are more likely to come out ahead in the deal.