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How to obtain the cheapest car loans

Getting a car loan can be a hassle, but shopping around can save you thousands in interest payments. Finding a cheap car loan depends on factors such as your credit score, the type of car you're buying and the institution from which you're receiving the loan. Because your car is one of the most expensive assets you'll have, it's important to find the cheapest car loan possible.

The first steps

Receiving the best interest rate possible on your car loan requires planning. Cheap car loans start with good credit. Pull your credit history for free at AnnualCreditReport.com. Know your credit score so that you know the interest rate you should get. The better your credit, the lower your interest rate.

Know your budget and research the type of car you want to buy. You may want that Porsche 911, but affording the payments is a different story. Make sure you can stay within your budget while finding a car that meets your needs. Research cars and pricing on sites like Edmunds and Kelley Blue Book for accurate estimates of car price and reliability. Keep in mind that interest rates on new cars are usually lower than on used vehicles.

Shop your car loan

Loan rates change on a daily basis and vary according to the lender, credit and region. Bankrate offers an auto rate calculator that compares current loan annual percentage rates of different financial institutions in your area. Your credit union or bank may also offer online car loan quotes. To see the difference between a credit union offer and dealer offer, use the car loan rate comparison calculator.

Crunch the numbers

While a low annual percentage rate is attractive, it's not the only number you should worry about. Trade-in value, down payment and the length of your loan all go into the total cost of your new car. Bankrate's low interest auto financing calculator can help you determine the amount of total interest you'll pay.

Finance before purchase

After researching and figuring your budget, you'll have a good idea of how much money you need to finance. Credit unions generally have the lowest interest rates on car loans, especially if you're already in good standing with the institution. Financing already in place will help you negotiate a fairer price for the car. Avoid long-term financing that runs for 72 or more months. These will end up costing you more in the long run. Shoot for short-term loans with low annual percentage rates, and make sure you can afford the total cost.

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