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7 Common Misconceptions About How To Get An Auto Loan

Posted by Carolina Trust Federal Credit Union on Jan 7, 2022 9:52:00 AM

You should never believe everything you hear, especially when it comes to auto loans. Misinformation about how to get an auto loan has spread and become common misconceptions. These misconceptions can lead people in the wrong direction when pursuing an auto loan.

It’s more important than ever before to know the facts about how to get an auto loan. We’re about to break down the biggest misconceptions that accompany getting an auto loan. It’s time for you to learn the truth.

Misconception #1: A Lower Auto Loan Payment Means You Got a Better Deal

One of the biggest misconceptions about getting an auto loan is that if you have a lower car payment, you landed a great deal. In order to lower your monthly payment, the term length of the loan is often extended. This means that you’ll end up paying more in interest.

Make sure that you take all of the numbers into consideration: the total price of the car, interest rate, and monthly payment. Don’t focus solely on the lower monthly auto loan payment.

Misconception #2: Car Financing Promotions

Many car dealers offer special interest promotional periods. However, you must look into the details to see what you’ll end up paying in interest once that promotional period ends. Make sure to carefully investigate the auto Loan terms so that you understand how much you’ll actually be paying in total.

Misconception #3: Auto Loan Approval Requires a Perfect Credit Score

In order to be approved for an auto loan, your credit score must be high and flawless. Right? Surprisingly, you don’t have to have a great credit score to get approved for an auto loan. Many credit unions are capable of working with people with low or no credit to help them get into a car. Carolina Trust actually offers a First Time Auto Buyer program. This auto loan offers favorable terms and reduced costs.

Your credit score primarily plays a role in determining your interest rate. Someone with a perfect credit score will get a more favorable interest rate, while someone with a low score will get a higher rate. Be sure to check your credit score yearly so you have no surprises when you apply for an auto loan pre-approval.

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Misconception #4: Auto Loans Require a Huge Down Payment

Many people believe you need to save up a few thousand dollars in order to secure an auto loan. While having a down payment helps, it is not required. The primary benefit of making a huge down payment is that it will lower your monthly payment. However, you may still be able to secure an auto loan without any money down.

Misconception #5: There’s No Need to Shop Around for Auto Loans

All auto loan companies are the same, right? Wrong! Shopping around is necessary to find the best rate. You may discover that the credit union can earn you an ideal rate, while a car dealership or bank may offer a higher interest rate. Always perform research before signing on the line.

Misconception #6: Car Dealers Will Have the Best Auto Loan Rate

While some auto dealers are capable of securing an ideal auto loan rate, there’s no hard and fast rule that states that they’ll always have the best deal. Many times, the credit union will be able to secure an ideal auto loan rate as well. It’s well worth shopping around to compare rates. Don’t forget that although a great interest rate certainly matters, there are many other factors to consider as well. You will want to work with trusted experts who are there to help you every step of the way.

Misconception #7: Seeking Multiple Pre-Approvals Will Destroy Your Credit

An auto loan Pre-Qualification and Pre-Approval are two separate things. Pre-Qualification is a more informal review of your finances requiring less information. Pre-Qualification doesn’t guarantee approval, but it does help you start shopping for a car within your budget. If you were to be pre-qualified at different lenders, this should not impact your credit score.

Pre-approvals are different. Getting pre-approved for an auto loan requires more information and although it’s not concrete, your finances will get a more thorough review. Many pre-approvals may impact your credit score over time.

Are you ready to get pre-approved for an auto loan? Please contact Carolina Trust’s Member Service Representatives today to begin your car buying adventure.

Topics: Personal Finance, Auto Loans & Car Buying