Build Your Credit With an Auto Loan!

loan image courtesy of Philip Taylor PT

When people tend to think of auto loans they tend to do as the result, or the goal of obtaining excellent credit.  While this can in fact be true, the opposite is also true; a great auto loan could be just what you need to move up the credit scoring ladder.  It doesn’t matter if you are just getting started or if you are rebuilding credit, the entire process is really quite simple…

Step 1: Pick a Vehicle

The first step might sound obvious, but it is deceptively complex if you want to do it properly: find a vehicle.  The best way to shop for a vehicle is probably online, but you need to know everything there is to know about the type of vehicle that you want to buy before you start shopping.  Be sure to know what to look for in terms of mechanical problems and recalls, and be sure to get a vehicle history report from a trustworthy source to see how any vehicle under serious consideration stacks up.  This step should only be done on any vehicle that is a serious purchase consideration as it does cost money.

A similar seriousness is required to order an inspection, but an inspection is just what the doctor ordered in order to complete a purchase.  The fact of the matter is that a professional mechanic should inspect any vehicle that you might want to buy whether you are buying local or from clear across the country.  Most people looking to buy a vehicle convince themselves that they themselves are qualified to judge a vehicle, sometimes with nothing more than a quick once-over and a test drive.  Unfortunately, modern vehicles are so complex and capable of being tampered with by those with honest mechanical knowledge that anyone short of a true mechanic should never trust their own instincts.

Step 2: Find a Lender

After locating a suitable vehicle you will need to find a lender.  Just as the Internet has changed finding vehicles, lenders are similarly easy to locate now.  A simple vehicle loan application can be verified for accuracy once and then forwarded on to hundreds or even thousands of lenders so that the best deal(s) can be instantly located for you.  The entire process is quick, painless, and almost assured to find you a lender that will work with you in next to no time.  Shopping for a loan online certainly takes away a lot of the waiting and uncertainty surrounding dealing with local lenders, but it also removes the advantage that local lenders hold over you because they know that they have the market cornered.

Step 3: Make Your Payments On Time

The key to increasing credit is to pay responsibly on each and every one of them.  This means that you need to pay at least the full monthly amount due on your auto loan each and every single month it is due on or before its due date.  Keep in mind that paying off an auto loan too quickly may not be optimal for rebuilding credit, so be sure to read up on credit scoring and understand how everything works before going above and beyond the call of duty or you may find yourself spending more money to build less credit.

Additionally, overpaying monthly premiums may decrease your monthly amount due or it may bring the end of the loan closer to the present, but most of the time it is a combination of the two.  Simply put, most lenders have a limited tolerance for having their monthly payments reduced and would rather shorten the term of the loan than to have pennies trickle in.

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