You did it: You're out on your own, you've got the job, and you've found a place to live. Now you're ready to purchase your first new car!
If you're like most others starting out, you may need to borrow money to cover the cost. Before you head to a dealership, consider all of your financing options, including online auto loans.
Today, many banks offer web-based loan calculators and online applications. According to the 2015 Automotive Buyer Influence Study commissioned by AutoTrader.com and Polk, new car buyers spend 70 percent of the shopping process online, and overall, an average of 75 percent of the car buying process is done online.
These options may offer the ultimate in convenience — you don't even need to leave your couch — but what should you know before you apply? Here are some tips to get started.
Do Your Homework Before Applying for an Online Auto Loan
Getting an online auto loan can be lightning fast depending on the information you furnish and your current credit history. It always helps to know your credit score and make sure your finances are in order before you apply.
Likewise, your credit history may determine how much you can borrow and the interest rate you'll pay, whether you apply online or in person. So take the time to correct or improve your credit rating before you apply for a loan. If you don't have a strong credit history, consider visiting the lending institution in person to build a relationship and get advice on what you might be able to borrow now and in the future.
Be aware that submitting a loan application, whether online or in person, will most likely trigger a credit inquiry, which can also impact your credit score.
Shop Around for Auto Financing
Lenders offer loans with competitive interest rates. If you have a relationship with a bank, begin your online search there. You might receive a discounted rate by signing up for automatic loan payments from your existing account.
Credit unions typically lend money only to their members, and their rates will vary.
Keep Security Top of Mind When Applying for an Online Loan
Just like when applying for a loan in person, you'll need to provide your Social Security number, driver's license information, mailing address, and other personal information when applying online. So it is important to take basic security measures.
Always use a secured connection; the information you send over public Wi-Fi or unencrypted websites may not be fully protected.
Banks are required to have a Privacy Policy and to provide privacy notices to their customers explaining what personal financial information they collect, as well as options for limiting how that information is shared. Check the website's Privacy Policy as well as the lender's general Privacy Policy. Research the company's reputation and only deal with reputable lenders. Be careful about information you send using email. Most banks will not ask for private information using email.
Leverage Online Calculators
Even if an online loan isn't right for you, you could benefit from various online tools like calculators. Using an online loan calculator will allow you to compare two loans by inputting the loan amounts, interest rates, and the terms of the loans.
You can also use online tools to determine what you can afford to pay for a new car. But don't forget to account for processing and paperwork fees, taxes, insurance, maintenance and repairs, and gas.
Applying for an auto loan online may be convenient, but it's not for everyone. If you have complicated documents to sign or notarize, or questions you need answered, you may prefer to apply for a loan in person, where you can draw on the expertise of financial professionals. Either way, once you're pre-approved for a loan, you'll be able to walk into the dealership with confidence.
