The most important thing to do before you apply for a car loan is to examine your financial situation. This is imperative because it will determine what you can and cannot afford. Skipping this could leave you with an exorbitant car payment that will leave you struggling to pay your bills. In order to check your finances, make a monthly budget. First, add up all your consistent monthly expenses, such as mortgage (or rent), utility bills, etc.

Then calculate your annual income and subtract the former number from the latter. Next, estimate how much your variable expenses cost, such as food or assorted goods you purchase frequently. This number is what you have to use on a car loan (assuming there are no other outstanding monetary goals you’re working towards, which should also be beforehand).

The final number you come up with will need to encompass several different costs, including licensing, insurance, registration, gas and maintenance. This is how much (expenses included) you’ll have to spend on your car loan. The second step is to determine what cars fit your needs and your price range. If you have a family, you may need a minivan. If you’re looking to commute affordably, you may be searching for a compact sedan or coup. Whatever your choice is, you need to remember that you have a limited amount of money to spend. Once you have narrowed down your car choices, you can begin researching the handful of cars you’ve selected for your car loan.

Credit unions, banks, newspaper ads and – of course – the internet, are always good places to start your loan research. Car dealer competitors are also excellent places to glean information about auto loan prices and interest rates.

Rebates and interest rates are your friend when it comes to looking for appropriate loans. You’ll be looking for the lowest possible interest rate – this will help you pay less in the long term. Rebates are good because they are marked by manufacturer incentives – either a car is selling slowly or the inventory needs to be reduced because there is not enough demand. Rebates can be offered in the form of cash given back to the customer, or a low financing rate.

Once you have all of this information down, you’re ready to go looking for car loans. This can be done by going directly to car dealerships, or you can do it online via applications. It is always good to keep in mind that bad credit will generally cost you when you’re looking for an affordable car loan. Bad credit means that you’re an unreliable customer – you have a history of not making payments on time. From a business perspective, this makes you a liability and it’s likely to increase your insurance rates as well. If at all possible, it is an excellent idea to try any means to reduce your bad credit before you look for a car loan.