Car and Truck Auto Loan: Here’s What You Need to Know

Scammers often take advantage of your enthusiasm for the bargain of a lifetime on a new car, which you might not stop thinking about its legitimacy. There are a few red flags to watch out for and avoid without getting scammed.

Red flag: the lender requests an initial payment.

A legitimate car lender will never ask you to pay upfront fees or request any other form of payment in order to complete your loan. These schemes usually all play out the same way – you send the money and you never see it again or hear from the lender again.

Red Flag: Guaranteed Loan Approval Dealers.

Although technically legal in some states, guaranteed loan approval advertising (also known as secured credit approval) is misleading and can be a trap. These types of dealerships like to approve you for a loan with heavy conditions, like forcing you to buy an unwanted car with high mileage or only approving you for a very high APR or large down payment.

Red flag: Leaving the batch without loan approval.

Perhaps the worst car scam is the yo-yo financing scam. While most dealerships can arrange competitive financing on the spot, some may call you days or weeks later to tell you that your loan terms have changed and your APR is much heavier than you originally had. agreed. You can avoid this by getting your financing from a trusted financial institution before buying a car.

Here are some tips for finding the best loan for you:

Know your credit score.

“It’s one of the main factors lenders use to determine what interest rate to offer you,” said Joe Pendergast, vice president of consumer lending at Navy Federal Credit Union.

Here’s a great chart that shows you what kind of APR to expect based on your current credit score. Or, if you find you need to improve your score, you can decide to wait until you can get a better rate before financing a vehicle. Knowledge is definitely power when it comes to car financing.

Get pre-approved.

“One of the best ways to ensure you find a car that fits your budget is to get pre-approved,” Pendergast added. “A pre-approval also gives you more bargaining power at the dealership because to the dealership it’s the same as paying cash for the vehicle.”

Weigh your financing options.

Having options allows you to compare interest rates and loan terms, so you can make the best decision.

“When you know in advance how much you’re approved for, you’ll be less likely to be swayed at the dealership to buy a vehicle outside of your financial comfort zone,” Pendergast said.

A military-oriented financial institution like Navy Federal is a great place to get vehicle financing. Their five-step pre-approval process makes it easy to figure out how much you can afford. They also have tons of resources, especially if you’re a first-time car buyer, to help you easily navigate the financing and buying process.

When it comes to car loans, research and some tactical patience can ensure you avoid being the target of a scam and get the best deal to manage your finances.

The Navy Federal Credit Union is federally insured by the NCUA.

This article is sponsored by Navy Federal Credit Union.