As the economy starts to bounce back, lenders are happy to report they’re seeing borrower delinquencies continue to drop in 2012, allowing the car loan market to settle back into the standards it upheld before the crisis. This reversion makes it an opportune time to apply for car loans under any circumstances (poor credit, bigger car budgets, etc.).

In this year’s second quarter (April – June 2012), U.S. car lenders saw a significant decline in both delinquency rates and vehicle repossessions. Thirty-day delinquency rates were down 2 percent. Sixty-day delinquency rates decreased as well. Although these decreases may not seem substantial, they’re actually great for borrowers right now.

While you consider the holidays and, potentially, the last of these super low car prices, now is the best time to take advantage of lenders’ confidence. If you approach your loan application the right way, you’re likely to end up with a phenomenally low interest rate.

  1. Take a look at your credit score and history report. Are there any delinquencies worth fixing? The first thing lenders will do is view your credit history. Generally, the better your credit score, the lower your interest rate. Because the market is relatively low right now, all interest rates are relatively low, but your credit will most definitely still affect your loan terms. If you need to do a bit of DIY repairs, take a look at your payment history, outstanding balance, account age, types of credit you currently have and the number of inquiries from your creditors. By making all your payments on time and pay down your remaining balances, your credit score should improve with time.
  2. Watch out for fees. Sometimes, lenders will push down the interest rates because they know that’s what borrowers are focused on. With lower interest rates, lenders compensate by piling fees on the loan. According to the Federal Reserve, average loan rates for a new car on a 48-month lease is 4.87 percent.
  3. Know your budget and save for a car. Make note of your budget, your down payment and other monthly and yearly fees, like oil changes, gas, regular maintenance, etc. If you approach lenders with a budget for an excessive car purchase that doesn’t match your credit history, they will likely turn you down. However, if you apply for a car loan that matches your credit history, the chances you will get denied in this market is extremely low.
  4. Get your application approved before you walk into the dealership. If you walk into a dealership without an approved car loan, a few things will happen: you’ll have less negotiating power with your salesman in getting a deal on your car, your salesman is the one who decides what affects car loan terms, and you’ll likely end up with a high interest rate because the salesman usually collects a bit of cash off his deal with the lender. On the other hand, if you walk in with a loan in hand, you’ll be more confident and walk in with the leverage of a cash buyer. You’re more likely to stick to your car budget and get the deal you want on a new or used car. It will also cut down your checkout process!

Author Byline: Erika Timmers is freelance writer working with CarFinance.com. She’s an expert in consumer finance and finding the best deal online. If you’re looking for a loan or refinancing your car loan, consider a free quote from Car Finance.

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