How to Get an Auto Loan
December 27, 2023
For most of us, our car is the first or second most expensive asset we own, depending on our homeownership status. That's why the average car purchase can feel like a marathon, with most buyers spending almost 15 hours from the initial research to the final purchase. Throw in high price tags, a nationwide car inventory shortage, and struggling with financing, and you've got a recipe for frustration!
Fortunately, shopping around for your auto loan doesn't have to be a hassle. Lenders like SRP Federal Credit Union aim to make the process pain-free, and a few simple steps can help you narrow down your options fast. If you're ready to finance your new ride, read on for insights from the lending experts at SRP.
Figure Out Your Budget
Before you start searching "bank near me" to find auto loans, determine how much car you can afford.
Beyond the initial price tag, you'll also need to factor in your insurance, maintenance fees, and fuel costs. If you're trading in your current ride, you can shave some money off the up-front cost, but if you're taking out a loan, you'll also want to estimate how much your regular payments and interest might be.
SRP's online affordability calculator can help with this. As a general rule, you shouldn't spend more than 20% of your monthly budget on your new ride.
Check Your Credit
If you don't already know where you stand with your credit, check it before you look for a loan.
You can get a free copy of your credit report once every year from each of the three major credit reporting bureaus. As a result of the pandemic, all consumers can get free weekly copies of their credit reports through the end of 2023.
“You can get your credit score from your local credit union or bank in Augusta, often at no cost. Members that have existing loans with SRP can view their credit scores through online banking or our mobile app. Alternatively, you can get it from personal finance apps and websites, including major institutions like Credit Karma and Experian.
Knowing about your credit can help you figure out what types of auto loans you're eligible for. Your loan approval, rates, and terms will often depend on your credit history. If you have better credit, you'll be eligible for more competitive terms.
There are plenty of free online tools that help you estimate your average loan interest rates based on your credit score and location. These sites can't guarantee rates and terms, but they can give you an idea of what to expect.
If you're not satisfied with what you see, consider postponing your car purchase for a few months to a year to improve your credit. You can also dispute any inaccurate information you notice on your credit report, which may raise your score. If your credit is low, you may still be able to seek a bad-credit or no-credit car loan.
Whether you have a great borrowing history or your credit could use some work, shopping around can help you find the best offers for your loan. You have two main options here: a car dealership vs. an online or brick-and-mortar financial institution.
Getting an auto loan from credit unions like SRP is ideal for several reasons.
Unlike dealerships, these lenders won't try to pressure you into buying a car. Some dealerships also mark up interest rates, which can cost you hundreds or even thousands over the lifetime of your car. You also can get loan pre-approval from a bank, which means you'll know exactly how much you'll pay for your loan in advance.
On that note, let's talk about pre-approval. Getting pre-approved for a loan means you'll fill out a loan application and let the lender do a hard credit pull. The lender will then tell you how much they'll offer, locking in your rates in advance.
You'll then have a set window of time, often 30 days, in which to shop for your car.
Pre-approval has several benefits. In addition to giving you realistic expectations about how much car you can afford, you'll eliminate the guesswork and stress of securing a loan during your car purchase. You'll also come across as an experienced buyer with dealerships, who won't be able to mark up your interest rates.
Keep in mind that pre-approval is not the same as pre-qualification. Pre-qualification still gives you insight into your loan terms from the lender, but there's no binding agreement between you.
Find Your New Car
Armed with your pre-approval, it's time to shop around for your new ride. As you do your research on the makes and models you prefer, keep in mind that your lender may set restrictions around where you can make the purchase.
Many banks and credit unions in Augusta require borrowers to buy from a reputable source. They may limit you to trusted dealerships within their network.
Discontinued brands, older vehicles, or cars with high mileage may be ineligible under your pre-approval terms.
You often won't be able to buy from a private seller. However, certain types of loans do allow this, so do your research.
Finalize Your Loan
Once you're happy with your new ride, make a final decision about your loan.
Don't hesitate to check out the dealership's offer while you're there. In some cases, their financing may be better than your pre-approval terms. The same is true if you're buying a car from an online retailer.
Whatever you decide, follow the lender's instructions to complete your application. You'll need to finalize the loan contract and get the vehicle's title and registration updated to your name.
Choose SRP Federal Credit Union
Getting an auto loan doesn't have to be a frustrating process. With the right tips and an investment of your time and effort, you'll be able to drive off with your new ride under satisfying loan terms.
However, don't choose your auto lender by clicking the first result that pops up after a search for “loans near me". Instead, choose the expert lenders at SRP Federal Credit Union. We're proud to help drivers in Augusta, Aiken and the surrounding areas get the best deals possible, with great rates and flexible terms.
Check out what SRP has to offer by viewing our auto rates or getting in touch.
However, don't choose your auto lender by clicking the first result that pops up after a search for “loans near me”
This article is for informational purposes only. All loans subject to approval and rate may vary depending on individual's credit history and other factors. Refinancing restrictions apply. All Credit Union loan programs, rates, terms, and conditions are subject to change at any time without notice. Membership required. SRP is federally insured by NCUA.