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Steps to Take When Applying for Auto Financing [ Auto Financing ]
January 19, 2009, 10:47 am

Be aware of these steps when you are looking at auto financing:

What to do before auto financing

As a buyer, you should plan well in advance. This means that you should have estimated your needs and your budget for auto financing even before you visit the dealership. There is a difference between paying for a loan and opting for a lease agreement. Remember that at the end of the day, with auto financing, the vehicle is yours. While this isn’t the case when you opt for a lease agreement.

Your credit record and current credit score will affect the interest rates you get for auto financing. When you opt for auto financing, look at the annual percentage rates of various lending institutions including your local banks and credit unions. If you have a bad credit score, then you will probably be charged a higher rate of interest.

What to do at the dealership when applying for auto financing

Stay within the band of the price range for auto financing decided by you. Dealers will always push for an expensive vehicle. Negotiate the financing with your dealer. In fact, the dealers will get a commission for the auto financing credit that they extend to the customers from the lending institutions. Understand the loan agreement completely before you sign. Understand that the dealer will charge you extra for optional products such as credit insurance or guaranteed auto protection. If you don’t want it, then don’t opt for these extras.

What to do after you have got the auto financing

When you have received auto financing, make your payments on time and in full. Missed and incomplete payments will also incur late fees and can adversely affect your credit report. If you have a lower credit score, it will impact your ability to get a loan and credit in the future. Those with bad credit are charged a higher rate of interest than those with a higher credit score.

If you have received auto financing from a dealership, they will usually sell the contract to a third party such as a bank or a credit union. This is one of the reasons that the interest rates at dealerships are higher than that at banks and credit unions. The financial institution that buys the auto financing contract from the dealership will then service your auto financing contract. Until the time the loan is discharged the credit institution will hold a lien on the auto title.

Dealers are also ready to approve auto financing for those that have really bad credit. There are certain pre-conditions for applying for auto financing. Customers should have a monthly gross income of $1500 and above. Secondly, they should be residents of USA or Canada. They should be able to prove their residency through utility or credit card bills. Customers that have had their vehicle repossessed within the past 12 months can’t apply for auto financing. But, if their vehicle was repossessed due to bankruptcy, then they can apply for auto financing. Some dealers may also charge a higher down payment for the loan. In some cases, it can be as high as 50% of the total auto financing loan amount.

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