Interested in how to get a car loan for a used car? The process is really pretty painless, but it does involve following a few simple steps. Before you cruise the dealer’s used car lot, do your legwork on how to get a car loan for a used car first.
- Get your credit report and analyze it. – It’s amazing how many people go car shopping and sit down to work out the finances only to find that they can’t get a good interest rate because of something in their credit history. Maybe they were late on a few payments or missed a couple altogether in the past year. These are black marks on your credit history and may result in you either paying much higher interest or not getting a loan at all. Do yourself a favor and get a copy of your credit report. It’s free through AnnualCreditReport.com from each of the nationwide credit reporting agencies. Once you get your report (you’re allowed one from each of the agencies over a 12-month period), analyze it for any errors or things you need to clear up. Work to improve your history and/or score for about six months if there are any glaring deficiencies.
- Get pre-approved for a car loan. – Another trap many would-be car buyers fall into is just going to the dealership and taking whatever loan the dealer’s finance manager offers. You won’t know if you’re getting a good deal or being taken to the cleaners. Avoid this by getting pre-approved for a car loan for a used car before you set foot on the dealer’s lot. Check out your credit union, the bank where you have your mortgage and/or multiple accounts. Also check online at BankRate.com to get quotes from multiple lenders under “Find an Auto Loan Rate.” You’ll receive quotes including interest rate, fees and conditions. It’s fast, easy, and you can quickly compare rates. Then, apply for the product you want. Once you’re pre-approved, you can go to the dealership and see if the financial products they can offer will beat what you have.
- Get quotes. – Banks generally won’t grant loans for used cars that are more than 4 or 5 years old. And they’ll typically charge higher interest rates for used car loans – about 2 percent higher than new car loans. But you can get a much better deal by shopping online sources. One to check, if you’re planning to buy a used car from a dealer, is instantcarloan.com, a sponsor on iSeeCars.com.
- Go for the shortest term possible. – Since you’ll likely be paying a bit higher interest rate on a loan for a used car, go for the shortest term (in months) as possible. That way, you’ll spend less in interest. Think of it as extra money in your pocket.
In the end, how to get a car loan for a used car is almost as simple as getting one for a new car. You still go through the same steps. You still need to work the numbers to get the best deal.
To figure out your car payments, use our auto loan calculator.