Credit Inquiries to Ask your Car Dealer When Applying for Auto Financing
Getting yourself a new or used vehicle is fun. Applying for financing isn’t quite as much fun. Here at Northwest Motorsport, we don’t want you to be intimidated by car loans and interest rates. That’s why we try to make applying for financing for your used vehicle as simple as possible. For some important information, you should know before you apply for car financing, keep reading!
Applying for Credit
Applying for credit before you even visit a dealership can be very helpful to the car buying experience. Knowing competitive loan rates and loan terms will be invaluable in knowing what your budget is. Finding the perfect vehicle is going to sting if you can’t afford interest rates on the loan it would take to get it. To help you start thinking about what you can afford, check out this auto loan calculator. If you’re in our neck of the woods, take a trip to our website to see how we can help you apply for car financing.
Auto lenders and banks everywhere want private parties like you to take their loans, but the first solution is rarely the best one. This is especially true when it comes to your car loan. If you don’t understand the fine details of your loan, you could end up making car payments you can’t afford. This will crash your credit score and reduce the quality of loans you can get for products and services in the future.
Does Applying for Car Financing Affect My Credit Rating?
The short answer is maybe. It depends on the individual person and their credit history. If you have a good credit history and there is a single inquiry into your credit score, you might see your score dip about 5 points. But nothing that will affect the loan amount you would receive. It’s usually nothing serious, but it can make an impact if you already have a low credit score.
If there are multiple inquiries on your credit over a short period of time, it will typically only count against your credit as one hard inquiry. Most credit models use a 14-day timeframe.
Applying for car financing can also help your credit score, though. As long as you make your payments on time, that is. It’s not easy to choose a car and take on a loan, so make sure you give it careful consideration. Understand the pros and cons of what kind of car you need versus what kind of car you want.
However, creditors across the country are fighting for the chance to give you a loan. So it can be hard to know what the best option is. That’s why Northwest Motorsport employs a team of credit experts just for you! They will look through hundreds of loan options and find you the best option when applying for car financing.
How Does My Credit Score Affect My Interest Rate?
Your credit score is a key determinant for the interest rate you receive on an auto-loan. For a used car, a score of at least 650 will put you in the bracket of single-digit interest rates. A score in the 700’s versus a score in the 500’s can be the difference between whether you’re paying 5% or 15% interest.
The lender will use your credit report and auto loan application to compute a debt-to-income ratio. If your debt is higher than your income, you could be asked to pay a higher interest rate, take a short loan, or any other number of unfavorable outcomes.
Your credit score can also affect your car insurance rates. If you have a low credit score and don’t need to buy another car right away, it might be more worthwhile to work on your credit before you go to the dealership.
How Can I Lower My Interest Rates?
If you need a new car now rather than later, there are a handful of things you can do to negotiate a better rate. If you have a low score, the dealer will most likely ask you questions about your credit. For instance, a score in the mid-to-low 500’s is a red flag, but if you don’t have much credit history or it was the result of identity theft, lenders will show some leniency. You should bring your two most recent pay stubs and proof of residency if you intend to negotiate interest rates, as this documentation demonstrates your cash flow and accountability.
One of the best ways to lower how much interest you’ll pay over the life of your loan is to offer a considerable downpayment. The more you can offer now, the less it will cost you in the long run. A trade-in vehicle will help lower your costs, but you should consider paying a down-payment on top of the vehicle.
Negotiation of your terms also includes how many monthly payments you want to make. Longer terms will be better for your cash flow, but shorter terms result in paying less interest. Because cars depreciate in value, the longest term you should opt for is 5 years or 60 months. The last thing you want is an upside car loan.
Let NWMS Help When You’re Applying for Car Financing
NWMS offers a one-time application you can fill out online to start your credit application process. We are vehicle finance specialists, and source some of the best credit options from across the country. After you fill out our form or give us a call, one of our credit experts will be in touch to help you sift through your best options. You’ll work together to establish what you need, and our experts will search the market for the financing options best fit for you.
We have relationships with large banks and smaller lenders, so we can go above and beyond to offer you unique and attractive rates. Fill out your application today!
Car Financing is Easier Than You Think
Applying for car financing doesn’t have to be intimidating. It’s a big decision to make and one you’ll have to live with for a few years, but if you take the right steps before signing a contract, you’ll make the right decision.
Hopefully, this gives you the confidence you need to start taking a look at your options for financing and vehicles. But if you need a little help, find out how Northwest Motorsport can help you finance a new or used vehicle.