Avoid These 3 Common Credit Union Auto Loan Application Mistakes
Blog Highlights:
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Budget Wisely for Your Car Loan: Don't stretch your budget to accommodate a car you can't afford. Use tools like a free car loan calculator to find realistic monthly payments that fit your lifestyle, ensuring you don't compromise your emergency savings or quality of life.
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Check and Improve Your Credit Score Before Applying: A strong credit score can unlock better loan terms. Obtain free credit reports, fix errors, and pay down existing debts to boost your score, increasing your chances of securing a lower interest rate and saving money in the long run.
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Get Pre-Approved Before Car Shopping: Pre-approval simplifies your car buying experience by determining your borrowing limit. It helps you focus on vehicles within your budget and avoids the hassle of dealership financing negotiations.
Applying for an auto loan is a pivotal step in acquiring your dream car, so it’s essential to understand and avoid which missteps can reduce your chances of getting approved.
Avoiding These Credit Union Auto Loan Application Mistakes Can Save You Time, Money, and Headaches
Purchasing a car, truck, or SUV comes with a series of significant decisions. Along with the primary goal of finding the best make and model for your needs, you’ll also need to position yourself for the car loan that offers the best possible interest rate and repayment terms. Failing to address some of the issues within your control can result in wasting your valuable time and money. These are three auto loan application faux pas that can be avoided.
Auto Loan Application Mistake #1: Taking Out a Larger Car Loan Than You Can Afford
How much you ask for when filling out your auto loan application should not necessarily match the cost of your most desired automobile. While luxury cars are enticing, the reality is that working families are best served by creating monthly budgets that prioritize necessities and carve out a set amount for leisure spending. Automobiles typically fall under the necessity umbrella because community members need to get to work, shop for groceries, and travel to appointments. Start by taking a deep dive into your monthly expenditures and see where you can cut, save, or reapportion monthly income to cover a car loan.
It’s crucial that the figure you arrive at doesn’t take away from emergency funds or prevent you from reasonable quality-of-life expenses. That’s largely because people who try reassigning too much money from dining out, catching a movie, or weekend getaways generally backslide into debt. Remember to buy a vehicle you can realistically afford. Be sure to explore a free car loan calculator to help you determine an affordable monthly car loan payment based on an ideal car purchase price. Adjusting your down payment, loan amount and repayment period can help you find the terms you need to afford your next vehicle.
Auto Loan Application Mistake #2: Forgetting to Check Your Credit Score and Make Improvements
One of the steps you can take to improve your buying power is to improve your credit score. In many cases, there are things you can do to raise your credit score in as little as 30 days. Start by getting copies of your credit report from the three major reporting bureaus — Experian, Equifax, and TransUnion. You can receive a free report every 12 months by requesting copies from AnnualCreditReport.com.
Take the time to scrutinize your report and highlight any errors you may find. Then, petition the credit agency to correct mistakes. Another strategy to consider is paying off existing credit card debt which can help you raise your score, but remember to keep your lines of credit open (don’t cancel your cards) to demonstrate consistent and long term access to credit.
Accessing your current reports can help you make strategic decisions to raise your score, giving you greater opportunities to secure a lower car loan interest rate saving you money over time.
Auto Loan Application Mistake #3: Not Getting Pre-Approved for Your Car Loan Before You Go Shopping
If you are curious how large of a loan you have the potential of being approved for, a car loan pre-approval is the perfect solution. Getting pre-approved for a credit union auto loan involves filling out an application with a local lender. The process does not necessarily result in what is known as a “hard pull” on your credit so that means your credit score will not be significantly impacted.
Knowing how much you can count on from a local lender helps narrow your car options and helps you decide whether to pursue a new or pre-owned vehicle based on your budget. Having your financing in order before heading to the dealership also allows you to skip the financing negotiations saving you time and allowing you to focus on the actual car cost.
Car loan pre-approvals are usually actionable for 30 to 60 days, unless some change to your credit history or income occurs. Make sure not to skip this essential step when beginning your car buying adventure.
Allegiance Has Your Credit Union Auto Loan Covered
At Allegiance, our experienced lending team is ready to help you through the auto loan application process. You can count on local decisions, competitive rates, an easy online application, and help every step of the way! Apply for your auto loan pre-approval today or contact us with questions.