Even if you have good credit, your auto loan can still go wrong. There are a lot of car buyers who make mistakes during the process, and these mistakes cause them to overspend or be rejected for an auto loan. No Denverite has to experience an epic-fail auto loan when making mistakes can be avoided. For your information, we wrote about some of the most common blunders people make when taking out an auto loan.
1) Applying First Before Checking the Credit
Applying for a car loan first before getting a copy of your credit report is a huge mistake. And believe it or not, a lot of car buyers are doing this. Approaching a lender without any idea how your credit is doing puts you at great risk of being charged a ridiculously high interest rate, which you might not really deserve. How can this happen? Unscrupulous lenders would get your credit report for you and lie about your credit score.
What to Do: At least 6 months before applying for a car loan, request a copy of your credit report for free through AnnualCreditReport.com. Dispute errors, if any, and see if you need to improve your credit.
2) Giving in to a Nicer Car
If you are easily attracted to luxury or sports cars, you might want to consider tagging someone along when the time comes for you to visit dealerships. Buying a more expensive car that’s completely out of the plan is wrong—and a sin if you have bad credit.
What to Do: Set your budget even before shopping for auto loans. This allows you to work around a specific price range for a car. It prevents you from spending beyond your means. Remember what finance experts always say: Your monthly car payments should never be over 20% of your monthly take-home. Stick with your budget even if you see a nicer car with a slightly higher price tag.
3) No Homework
Shopping for auto loans without doing your homework first? That’s one of the biggest mistakes car buyers make. We at Denver Auto Approval Center understand that shopping around, which includes comparing auto loan rates, is a tedious, time-consuming task especially if you’re excited to get new wheels. But it’s something every smart car buyer would never dare to skip. Why? It helps them avoid auto loan rip-offs and get the best possible rate out there.
What to Do: Find at least 3 legitimate lenders in Denver and request for price quotes. Compare these quotes with each other with the help of an auto loan calculator. By this, you will know whether a lender is offering an unreasonable rate. In addition, read reviews of the vehicle models you’re considering to purchase.
4) Inking the Contract Too Quickly
This isn’t new anymore. A lot of car buyers to this day, despite constant warnings and reminders from experts, do not read the contract before signing it. You can be ripped off, spending more money than you should, if you don’t take some time reviewing the paperwork before finalizing everything with your signature.
What to Do: Make sure the contract includes all the terms you and the F&I officer agreed with during the negotiation. Do not sign anything unless everything is clear, accurate, consistent and perfectly settled. Be very careful not to bind yourself with something you don’t completely understand and would regret later on just because you inked that dotted line hastily.