- 1). Review your credit report. You are entitled to receive one free credit report annually from each of the three major credit bureaus (link below). The higher your credit rating, the more bargaining power you have. If there is any inaccurate information on your credit report, work with the company that reported the information to have it corrected.
- 2). Financing through an automotive maker is frequently a good deal. The car companies have a vested interest in selling cars, and it's in their best interest to offer you a competitive loan. Frequently they have low- or no-interest incentive programs to entice you to buy their cars. Those are great deals, but you will need a good credit report to qualify for them and they are for new cars only.
- 3). Obtaining an auto loan through your bank is an option. The bank will require you to use the car as collateral and will place a lien against the car until the loan is paid in full. One advantage of bank financing is that it extends to used cars. The stronger your credit report, the lower your interest rate should be. If you are not pleased with the interest rate your bank offers, consider other banks.
- 4). Tapping an existing personal line of credit is an excellent option for financing a car. Only people with established, strong credit histories qualify for personal lines of credit. If you have one, you are in the enviable position of being able to make what is essentially a cash offer from the seller's perspective. This gives you a great deal of power in negotiating the price you will pay for the car.
- 5). Tapping a home equity line of credit is a tool used by many to finance cars. This method has considerable pros and cons which you will want to weigh carefully. One advantage is that, like a personal line of credit, you can pay cash to the seller. You can use it for any car you want, new or used. The interest you pay on the loan will likely be tax-deductible. One disadvantage is that your house is used as collateral. If the unforeseen happens, and you can't pay for the car, your house is on the line.
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