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In a tight credit environment, it may seem that those who can least afford to take out a loan for an automobile are the same persons who are most penalized with interest and finance charges. However, the reality is, anyone with a good credit rating can compete with the auto-buying crowd for competitive car financing. A guide to car financing focuses on your credit rating and your ability to pay off the debt.

These components allow you to seek finance for a car that you can afford based on your assets such as employment, liabilities, and past payment history. Historically, you've been able to borrow more money than you could afford through extended loan periods that lowered your monthly payments, but these deals cost you a great deal more in interest and finance charges.

When you opt for extended period loans, and give a low down payment, it is a given that you'll end up with an upside down loan where you owe more than the car's worth within a year or two. This is true whether you buy a new or used car. If you need a car for work and family, you'll need to know how to find the best options and you can find them through a guide to car financing.

Banks are no longer extending loose credit, and with the tight credit market you have to work smarter than ever. The auto industry is severely wounded from the credit crunch, so working smarter is easier if you know the ins and outs of buying a car. Unscrupulous salesmen still exist because most still work on commission, so it's up to the consumer to stay within the limits of what he can and cannot afford.

Credit and Interest rates:

Since your credit rating affects the interest rates on your auto loan, the first thing you must know is your FICO. (Credit rating) Beyond your credit rating you need to obtain a copy of your credit report from one of the three reporting agencies and make certain your payments are up to date. Resolve any disputes appearing on your report and make sure it's a clean report before applying for a loan.

Generally, it's a good idea to obtain a pre-approved low interest loan. Credit unions still offer low rates and a decent credit rating can secure a loan from banking institutions. Car dealers typically go through banks to obtain your loan. They have their favored banking institutions and they're not looking out for your best interest even if you have good credit. They're still trying to make money on the finance deal.

Loans for new car buyers:

U.S. auto industries are experiencing exceptional hard times in this economy and tight credit environment, but it's also true that great opportunities exist with the manufacturer for rebates and low interest loans. Rebates are available for all new car buyers and if your credit and income level meet the requirements, you may be able to obtain the best low interest loan directly from the auto manufacturer.

Get on the Internet and find the auto you're interested in buying and collect information on rebates, low interest loans, and buyer incentives. The three big U.S. automakers are motivated to sell new cars and you're in the driver's seat in this buyer's market when you finance your car wisely.

Recap:

Obtain your credit report

Know your FICO score

Search for best finance loans

Make your best car deal

If you're like thousands of other car buyers, you don't like to haggle face-to-face with car salesmen. You have the option of obtaining several quotes from different car dealers over the Internet and still take advantage of buyer incentives, and car financing. When you enter the dealer showroom have all the documents and correspondence with you and buy your car without further negotiation.

If you find a great deal, go for it. Remember, it's a buyer's market and you're not locked in with one dealer until you sign on the dotted line.

Learn more about this author, Mona Gallagher.
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