How to find the best car loans

Qualifying for the best interest rates on car loans depends significantly on your credit score. Find out your credit score before you go to the car dealer so you know whether you qualify for the lowest rates. Some less-than-scrupulous car dealers may tell you that your credit score won’t qualify you for the best interest rates, so knowing your score can strengthen your negotiating ability. If your credit score is 740 or higher, you are in great shape. If your credit score is lower than 700, you may want to take some steps to boost your credit score before applying for a car loan. Fix any errors, pay down your balances and pay your bills on time.

If you are eager to buy a new car, taking these extra steps can make the difference and help you qualify for the best car loans.

Consumers might be tired of hearing about the importance of doing their homework, but the truth is that spending a few minutes on research can help them save a ton on car loans. While picking the make and color of a new car may be fun, savvy consumers start by comparing payments and rates on different car loans. Low interest rates on car loans translate to lower monthly payments, but there are a few other car loan tips that car buyers should know.

New car loan after bankruptcy?

AnswerDear Dennis,
After bankruptcy, what would help me repair my credit quicker — reaffirming with my present car loan, or getting a new car and loan?

A reaffirmation agreement is a legal, enforceable contract, filed with the bankruptcy court, which states your promise to repay all or a portion of a debt that may otherwise have been subject to discharge in your bankruptcy case. The bankruptcy wipes out your legal liability to pay on the car. When you sign a reaffirmation agreement, you are re-establishing that liability.

What do you owe on your current car? What is the interest rate? How reliable is your current vehicle? Your current car could require a lot of repairs and maintenance, or the balance could be very high. These are important factors to consider prior to reaffirming the loan.

By contrast, if you get a new car loan after filing bankruptcy, you will have much less credit history for that new loan.

I believe my questions are as important as, or more important than, the question you ask. You have just filed bankruptcy and wiped out your liability for your outstanding debt. Your liability on the car loan was also wiped out, but you might want to keep the vehicle and reaffirm the loan.

Getting a reliable car with a low monthly payment and low balance is a wise way to start over. After paying this car off, you will have more leverage to get another vehicle, one that you might be more excited about.

For instance, the length of time that an active, positive credit line appears on your credit is one factor used in calculating your credit score. The length of your credit history makes up 15 percent of your credit score. When you reaffirm a loan through the bankruptcy, you will show the payments made prior to the bankruptcy as well as payments made after the bankruptcy is over.

I think this is an excellent question, but there are a couple of things to consider before answering your specific question.

After bankruptcy, you will be able to get another car — but most likely not the car of your dreams. You will have to settle for a less flashy, but still reliable vehicle as you begin to prove that you are worthy of credit.

I hope this helps you answer your own question. You will need to decide whether the reaffirmation is worth the risk or whether it is best to start rebuilding credit with a used but reliable car. Either way, as long as you make your payments, your credit will slowly recover.

– Dennis

Justin HarelikQuestionDear Bankruptcy Adviser,

You ask which will be better for your credit. I am not an expert on credit scores, so it is difficult to answer this question with any level of conviction, but I do know a few things about credit.

Can you lower the interest on a car loan?

Tara Baukus MelloQuestionDear Driving for Dollars,
– Anna

I got a new car from Honda in 2007 at 12 percent for five years. How can I lower my interest rate?

AnswerDear Anna,
If you have good credit and have been paying on time, you may be able to get your interest rate lowered by calling your lender and asking for a better interest rate. But chances are, the only way you’ll be able to lower your interest rate is to refinance your car loan. The good news is that auto refinance rates are lower than they’ve been in recent years. The bad news is that the shortest length of time you’ll probably be able to refinance for is 36 months — longer than the length of time left on your existing car loan. Still, it may be worth it. To learn more about the process and whether you qualify, read this Bankrate story on refinancing a car loan when money is tight.

Use a car loan calculator to help you save

Financing a new or used car can be a bit daunting. Fortunately, there are plenty of tools to help with the calculations involved in a loan. A car loan calculator can help you make the right decision for your situation and can help you save money in the long run. Here are three options, along with calculators, to help you estimate and save.

How to save cash on car loans

Getting rid of that old lemon in exchange for a new ride can be quite exhilarating. But before you drive your new beauty off the lot, make sure you have your finances straight. Car loans can be as difficult to figure out as a Rubik’s Cube, but keeping an eye out for some common blunders can point you down the right road.

Use car loan calculators to help you save

Financing a new or used car can be a bit daunting. Fortunately, there are plenty of tools to help ease the calculations involved with a loan. A car loan calculator can help you make the right decision for your situation and help you save in the long run. Here are three different situations along with car loan calculators to help you estimate and save.

Pay off mortgage or car loan first?

First, congratulations for being in such a good financial place. To make your decision, consider the details of your mortgage and car loan. Look at your interest rate and compare how much you are paying in interest over the life of the car loan and mortgage. Also consider any tax breaks you are getting from the loans. For example, many people can write off the interest paid on their mortgage loan on their annual taxes. To help you through your decision, use Bankrate’s debt pay down calculator.

– TAK

AnswerDear TAK,
We bought a home and a car last year. We have one year of reserves in savings to cover all of our bills. In a few months, we expect we’ll have several thousand dollars extra that we’d like to use to further pay down our debt. Is it better to pay down our 30-year mortgage loan or our five-year car loan?

Tara Baukus MelloQuestionDear Driving for Dollars,

Should you sign a car loan to buy a car?

– Suzanne

It depends on what interest rate you’ll be paying on the car loan and the home equity line of credit, or HELOC, as well as the interest rate you are earning on your savings. Compare the rates to see what makes the most financial sense. Remember that the interest on the HELOC is often tax-deductible. Bankrate’s car loan-home equity calculator can help you determine whether the auto loan or HELOC is the better deal.

Also think about your future financial situation and whether you might be strapped for cash. Depending on your situation, you may need that cash savings, while a high debt in your HELOC could lead to a default, causing you to lose your home. By getting a separate car loan, you are more insulated from your car purchase affecting other areas of your life, should you run into financial problems.

Should I buy a car using the money from my home equity line of credit, get a loan or use savings?

Tara Baukus MelloQuestionDear Driving for Dollars,

AnswerDear Suzanne,

Avoid common mistakes with car loans

An easy thing to do is to pay the taxes and fees outright and not roll these additional charges into your car loans. Financing fees automatically put you upside down in the loan.

For example, buy a car that will hold its value longer. Once you’ve narrowed your search to a few different types of cars, go to an independent car information website such as Kelley Blue Book to see the differences in depreciation among your choices.

Making mistakes in your car loan agreement can undo all the negotiating you did to get that great deal. These mistakes could lead to you being upside down on your car loans for an extended period of time, struggling to make payments, or just paying more every month than necessary.

Here are a few mistakes to avoid when figuring out the terms of car loans.

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Letting the dealer tell you your own credit score. Know your credit score before you set foot in a dealer lot. If you don’t know what it is, the sales reps can tell you anything. A great way to check your credit score is to visit FreeCreditReport.com. You can access your report once a year from each of the three major credit bureaus. You can also visit a bank or credit union and apply for a car loan. That way, you’ll know how much vehicle you can buy and the interest rate for which you qualify.

Rolling negative equity forward. If you are upside down on a current car loan, don’t fold that negative equity into the loan for a new vehicle. You’ll be paying interest on that negative equity for the term of the new loan. And you’ll be even more upside down on your loan.

Trying to negotiate the monthly payment instead of the purchase price. Don’t tell the sales representative what you can afford to pay every month. If you do, you’ll lose the ability to negotiate a lower purchase price. Once the sales rep knows how much you can afford, he knows how much room there is to hide higher interest rates and fees.

While it’s true that it’s hard to avoid being upside down on a car loan, there are a variety of things you can do to minimize the time you’re underwater.

Know your new-car financing options

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Improve your credit score

The amount of interest you’ll pay on your new-car financing depends heavily on your credit score. The better the score, the lower the rate you’ll likely get. Before applying for a loan, check your credit report for inaccurate information that could damage your creditworthiness.

If your credit report is clean, but your credit score is less than stellar, you can take some immediate steps to improve it. Pay down high-balance credit cards and make sure you make payments on time. Keep open credit cards that are at a zero balance since available, unused credit is part of the equation.

Get the best deal on new-car financing

Before you get new-car financing, take a few minutes to educate yourimmolation on how the process works. That could get you better terms on your loan.

With new-car financing comes an interest rate that you will pay for the life of the loan. Before you decide on which car, you should first figure out your monthly payment with interest. The Bankrate.com auto loan calculator helps you find your monthly payment based on the price, length of the loan and interest rate. It also can show you how quickly you can pay off the loan by *** additional payments. Find current rates on auto loans at Bankrate.com.

Shop around

You’ll probably visit several dealerships before settling on the car you want to buy, so do the same for your new-car financing. It will be easier to get a loan from the car dealer, but the dealer is unlikely to have the best rate. Instead, seek a car loan from a bank or credit union.

Get at least three quotes and use the best rate in negotiations with the dealer. Banks and dealers have leeway on the interest rate they can charge, so being armed with a few quotes will ensure that you get the best rate on your new-car financing.