Car Deal Canada

Car Deal Canada

10 Things To Know Before Applying For a Car Loan

Photo of car loan application paper

So, you’re thinking of buying a car? That’s great! But unless you’re planning to pay in cash, you’ll likely need to get a car loan. Before diving into the world of auto financing, arm yourself with knowledge. Here are 10 things you need to know before applying for a car loan.

Get Pre-Qualified in Under 60 Seconds

All Credit Approved and 0 Money Down Options Available

 

1. Know Your Credit Score

Your credit score is a major determinant of the interest rate you’ll receive. Before even walking into a dealership or bank, make sure to check your credit score. The better your score, the lower your interest rate will be. This could save you hundreds or even thousands of dollars over the life of the loan.

 

2. Determine Your Budget

Sit down and assess your finances. How much can you afford to pay monthly? Remember to factor in insurance, maintenance, and gas. It’s crucial to stay within your means, so you don’t end up with a car that becomes a financial burden.

 

3. Down Payment Matters

The more you can put down upfront, the better. A sizeable down payment reduces the amount you need to borrow, which means you’ll pay less in interest over the life of the loan. Plus, lenders see larger down payments as a sign of commitment, which can increase your chances of loan approval.

 

4. Shop Around for Best Rates

Don’t just take the first offer you get. Visit multiple lenders like CIBC, from your bank to credit unions to online lenders. Each will have different rates and terms, and shopping around can save you money.

 

5. Understand Loan Terms

Loans aren’t just about monthly payments. Understand the terms of your loan, including the interest rate, the length (or term) of the loan, and any penalties for early repayment.

 

6. Consider Pre-Approval

Being pre-approved gives you a clear picture of what you can afford and shows dealerships that you’re serious. This can not only give you an edge in negotiations but also speed up the purchasing process.

 

7. Beware of Extras and Add-ons

Dealerships might try to upsell you on extras like extended warranties, credit insurance, or other add-ons. While some may be beneficial, they can also significantly inflate the cost of your loan. Make sure to assess each add-on’s value and decide whether it’s truly necessary for you. Dealers have also been known to break all in pricing laws, so make sure you always double check everything and review it.

 

8. Know the Total Cost

It’s easy to focus solely on the monthly payment, but you should also understand the total cost over the life of the loan. A lower monthly payment might seem attractive, but if it’s because the loan term is extended, you might end up paying more in interest in the long run.

 

9. Avoid Long Loan Terms If Possible

It’s tempting to stretch out a loan for six or seven years to get a lower monthly payment. However, the longer your loan, the more you’ll pay in interest. Plus, you risk being “upside-down” on the loan, where you owe more than the car is worth.

 

10. Be Wary of Subprime Loans

If you have a low credit score, you might be offered a subprime loan. These loans cater to individuals with less-than-perfect credit but come with much higher interest rates. If you do consider a subprime loan, be sure to read the fine print and understand the terms, as they can be costly in the long run.

 

In Conclusion

When it comes to financing a new car, knowledge is power. The more prepared and informed you are, the better equipped you’ll be to find a car loan that fits your budget and needs. By keeping these ten things in mind, you’ll be in a strong position to navigate the car buying process and drive off with a deal that makes sense for you. Safe driving!

 

1. Know Your Credit Score

Your credit score is a major determinant of the interest rate you’ll receive. Before even walking into a dealership or bank, make sure to check your credit score. The better your score, the lower your interest rate will be. This could save you hundreds or even thousands of dollars over the life of the loan.

 

2. Determine Your Budget

Sit down and assess your finances. How much can you afford to pay monthly? Remember to factor in insurance, maintenance, and gas. It’s crucial to stay within your means, so you don’t end up with a car that becomes a financial burden.

 

3. Down Payment Matters

The more you can put down upfront, the better. A sizeable down payment reduces the amount you need to borrow, which means you’ll pay less in interest over the life of the loan. Plus, lenders see larger down payments as a sign of commitment, which can increase your chances of loan approval.

 

4. Shop Around for Best Rates

Don’t just take the first offer you get. Visit multiple lenders like CIBC, from your bank to credit unions to online lenders. Each will have different rates and terms, and shopping around can save you money.

 

5. Understand Loan Terms

Loans aren’t just about monthly payments. Understand the terms of your loan, including the interest rate, the length (or term) of the loan, and any penalties for early repayment.

 

6. Consider Pre-Approval

Being pre-approved gives you a clear picture of what you can afford and shows dealerships that you’re serious. This can not only give you an edge in negotiations but also speed up the purchasing process.

 

7. Beware of Extras and Add-ons

Dealerships might try to upsell you on extras like extended warranties, credit insurance, or other add-ons. While some may be beneficial, they can also significantly inflate the cost of your loan. Make sure to assess each add-on’s value and decide whether it’s truly necessary for you. Dealers have also been known to break all in pricing laws, so make sure you always double check everything and review it.

 

8. Know the Total Cost

It’s easy to focus solely on the monthly payment, but you should also understand the total cost over the life of the loan. A lower monthly payment might seem attractive, but if it’s because the loan term is extended, you might end up paying more in interest in the long run.

 

9. Avoid Long Loan Terms If Possible

It’s tempting to stretch out a loan for six or seven years to get a lower monthly payment. However, the longer your loan, the more you’ll pay in interest. Plus, you risk being “upside-down” on the loan, where you owe more than the car is worth.

 

10. Be Wary of Subprime Loans

If you have a low credit score, you might be offered a subprime loan. These loans cater to individuals with less-than-perfect credit but come with much higher interest rates. If you do consider a subprime loan, be sure to read the fine print and understand the terms, as they can be costly in the long run.

 

In Conclusion

When it comes to financing a new car, knowledge is power. The more prepared and informed you are, the better equipped you’ll be to find a car loan that fits your budget and needs. By keeping these ten things in mind, you’ll be in a strong position to navigate the car buying process and drive off with a deal that makes sense for you. Safe driving!

 

1. Know Your Credit Score

Your credit score is a major determinant of the interest rate you’ll receive. Before even walking into a dealership or bank, make sure to check your credit score. The better your score, the lower your interest rate will be. This could save you hundreds or even thousands of dollars over the life of the loan.

 

2. Determine Your Budget

Sit down and assess your finances. How much can you afford to pay monthly? Remember to factor in insurance, maintenance, and gas. It’s crucial to stay within your means, so you don’t end up with a car that becomes a financial burden.

 

3. Down Payment Matters

The more you can put down upfront, the better. A sizeable down payment reduces the amount you need to borrow, which means you’ll pay less in interest over the life of the loan. Plus, lenders see larger down payments as a sign of commitment, which can increase your chances of loan approval.

 

4. Shop Around for Best Rates

Don’t just take the first offer you get. Visit multiple lenders like CIBC, from your bank to credit unions to online lenders. Each will have different rates and terms, and shopping around can save you money.

 

5. Understand Loan Terms

Loans aren’t just about monthly payments. Understand the terms of your loan, including the interest rate, the length (or term) of the loan, and any penalties for early repayment.

 

6. Consider Pre-Approval

Being pre-approved gives you a clear picture of what you can afford and shows dealerships that you’re serious. This can not only give you an edge in negotiations but also speed up the purchasing process.

 

7. Beware of Extras and Add-ons

Dealerships might try to upsell you on extras like extended warranties, credit insurance, or other add-ons. While some may be beneficial, they can also significantly inflate the cost of your loan. Make sure to assess each add-on’s value and decide whether it’s truly necessary for you. Dealers have also been known to break all in pricing laws, so make sure you always double check everything and review it.

 

8. Know the Total Cost

It’s easy to focus solely on the monthly payment, but you should also understand the total cost over the life of the loan. A lower monthly payment might seem attractive, but if it’s because the loan term is extended, you might end up paying more in interest in the long run.

 

9. Avoid Long Loan Terms If Possible

It’s tempting to stretch out a loan for six or seven years to get a lower monthly payment. However, the longer your loan, the more you’ll pay in interest. Plus, you risk being “upside-down” on the loan, where you owe more than the car is worth.

 

10. Be Wary of Subprime Loans

If you have a low credit score, you might be offered a subprime loan. These loans cater to individuals with less-than-perfect credit but come with much higher interest rates. If you do consider a subprime loan, be sure to read the fine print and understand the terms, as they can be costly in the long run.

 

In Conclusion

When it comes to financing a new car, knowledge is power. The more prepared and informed you are, the better equipped you’ll be to find a car loan that fits your budget and needs. By keeping these ten things in mind, you’ll be in a strong position to navigate the car buying process and drive off with a deal that makes sense for you. Safe driving!

Get Approved Today

See if you qualify in under 60 seconds

Get Approved Today

See if you qualify in under 60 seconds