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Mark Kolarik
Mark Kolarik is the President of the Kansas Teachers Community Credit Union, located in Pittsburg, KS, since 10-2002 and is a board member of the Kansas Corporate Credit Union located in Wichita, KS . He has been employed in the financial service industry for the last 31 years, having worked in several credit unions for 21years and 10 years in the banking industry. He holds a Bachelor of Business Administration degree from the University of Wisconsin-LaCrosse and is a Certificated Credit Union Executive.
Banking & Finance
2010-10-01 10:11:00
Obtaining pre-approved car loans
Question: I’m in the market of buying a vehicle, how do I get pre-approved before shopping and exactly how does my credit score affect my interest rate?
Answer: Before applying for a loan, it is wise to do a little preliminary homework to aid you in your purchasing decisions. Check your Credit History: As with all things, the better your credit score, the better the rates and terms will be. Credit scores range from about 350 to 800. If your score is not above 600, more than likely you will get the least attractive interest rate. Scores of at least 720 qualify for the best rates. Obtaining a car loan depends largely on the three C’s: Credit: You must be able to show a history of responsible financial management, of course, credit. This includes paying bills on time, limiting debt and saving regularly. If you are not sure where you stand, you can obtain your credit report free online from www.annualcreditreport.com. Your personal inquiry will not count against your score, but lender inquiries will. Always limit the number of inquiries initiated to protect your credit score. Capacity: You will need to show sufficient income and that you have the ability to repay the loan for which you are seeking approval. Employment income and secondary forms of income such as child support and/or alimony payments will all be considered. Collateral: Lenders are generally more comfortable with highly liquid assets that can be recovered in the event of default. In this instance, the car itself will serve as collateral. Depending on your credit qualifications, a down payment may be required to purchase the vehicle. Words of Wisdom: •Buying a vehicle is a large purchase, and the loan a considerable one. Remember that you have time to make a decision. Take your time and consider if you want to keep more money in your pocket. An example might be; if you are interested in a $20,000 loan over 5 years to finance your vehicle purchase. The difference in the amount of interest you will pay between a 5% and 7% interest rate loan is $1,116. Why pay more, when rate shopping can save you hundreds or thousands of dollars. •Most dealerships can provide financing through their own finance departments. The rate offered to you may or may not be competitive. Many dealerships offer teaser rates of 0% financing, however, only a small handful of buyers are eligible for these rates. •Contact your local credit union or bank before you visit the dealership. They will ask you to complete a loan application, review your loan request, and then if approved provide you with a loan interest rate. It’s best to shop around for the best interest rate before you visit the dealership. Then you will be in a position to make a good choice on the interest rate to finance your auto purchase. Whether you opt for credit union/bank or dealer financing you are in control of the loan process. Become informed about the interest rates and terms. If a reasonable offer is not available to you, your best decision may be to hold off until you have an improved credit score or a significant down payment.
 
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