If you are planning to purchase a car from a dealership, you are probably planning to finance the transaction. Most people simply don't have enough money saved to pay for an automobile from a dealership in full and out-of-pocket. Nevertheless, you can still avoid paying high interest rates by ensuring that the lenders financing your loan see you as creditworthy. Here are a few things you can do to make your credit profile more attractive to lenders:
Don't switch jobs.
If you are planning to buy a car soon, don't switch jobs yet, even if you have plans to change occupations in the near future. If you have years of tenure at your current job, this can help lenders see you as responsible and consistent.
Once your car loan is secured, you can pursue other employment. Still, be sure that you only accept a position that offers the same or more money than your current position if you don't plan to reduce your debt.
Correct errors on your credit report.
Take a careful look at your credit report to identify negative entries that are erroneous. You can challenge anything that you believe is incorrect by disputing the issue with the reporting agency. If the creditor does not supply information to substantiate the data on the credit report, the disputed entry must be removed.
You can order one credit report each year from each reporting agency. The process is fairly simple and can be performed online. Before your report can be viewed, you will be asked to answer personal questions that only you should know, such as past addresses and employers.
Pay off debts with low balances.
If you have enough money to pay off a low balance, satisfy the debt. As you get rid of debts, you lower your debt-to-income ratio. This can reassure creditors that you have more than enough money to meet monthly expenses.
Save a large down payment.
A large down payment looks great to creditors and lowers the amount of money that you need to borrow. If you are planning to purchase a car within the next couple of months, budget to put aside a certain amount of money each month. It is often best to save an amount similar to the expected monthly car payment. This helps ensure that you can actually afford the car payments that you will be incurring.
To learn more things you can do to get the lowest interest rate on your car loan, schedule an appointment with the financial department of an automotive dealership in your area.