How to Shop for the Best Auto Loan

So you've decided to buy a car. Have you thought about how you'll pay for it? Whether you're purchasing a new or used vehicle, the first thing you should know is rates offered on car loans vary greatly between interest rates and lenders. And your credit history plays a very important role in what kind of rate those lenders will offer you on the car loan. Learning how your credit is evaluated by these lenders to determine the rate that you'll be offered will help you get the best deal.

Before you begin comparison shopping for car loans, there are a couple of things you should take care of first:

• Order a copy of your credit report. It's very important to know what's on your credit report before you apply for a car loan. Go over all of the information and make sure everything contained in your report is correct. If errors are found, contact the credit bureaus and take steps to have them corrected. Visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, Post Office Box 105281, Atlanta, GA 30348-5281.
• Learn your credit score. Knowing your score will save you a lot of money in the interest you'll be charged. Credit scores are available for a nominal fee online from any one of the nation's three credit bureaus: Trans Union, Experian and Equifax.

Keeping that in mind, here are several more tips that will help you snatch the most favorable auto loan available to you:

• Contact prime lenders first. Since prime lenders generally offer much lower interest rates on loans than sub-prime lenders, it best to obtain your loan from one of these grantors.
  
  
• Investigate all avenues, even if you have less than perfect credit. Speak with a loan officer where you currently conduct your banking. Whether its a regular bank or a credit union, they may be willing to work with you and offer you a good rate to keep your business.
  
  
• Finally; no matter what, don't allow yourself to be pressured into making a quick decision. Finding a good car loan is no different than shopping around for any other type of loan. Do your homework to find the auto loan that is right for you. And if you are in a position where you have to pay a higher interest rate because of your credit, making your payments on time for a couple of years will improve your credit history. At that point; with improvements to your credit-worthiness, you'll be in a position to refinance your car loan at a cheaper rate.