A home loan typically is the largest debt a consumer has. Choosing a mortgage is a big decision, and one that must consider many variables. Your credit score really comes into play when you’re in the market for a home or new vehicle. Since the 1980s, lenders have become more sophisticated about using credit scores to evaluate borrowers. This means both good and bad things for you.

The good news is that an increasingly national lending market means that there are programs for people with even checkered credit histories to get home or car loans. Of course, if you have poor credit, you’re going to pay a lot in interest and fees.

The bad news is that lenders are more demanding than ever about personal information from borrowers and in a cruel irony the lending process has become a lot less personal than it used to be. Even local banks use mathematical formulas to decide whether they will lend money…and at what cost.

The terms and conditions offered by secured lenders banks, credit unions and finance companies who lend on things like car and home purchases vary widely. In this chapter, we’ll consider the details.

As in any market, some lenders offer better rates than others. Even as lenders have become more scientific, the formulas they use can be quite different. Different lenders use different credit score ranges when determining whether to lend to you…and which interest rate to offer. If your credit score is 718, you may be offered the best rate by one company and the second-best by another.

Financing a new car purchase requires some research. Before venturing out to the car dealerships uninformed, let’s take a look at what you will need to know about the car buying process. First of all, about 70% of all new car purchases are financed. So unless you plan on paying cash for your new car, or you are going to apply for a car loan, chances are you will be financing your purchase.

Car Loan Tips

1. Determine your financial situation
This is the first and most important step in the car buying process. You must know how much you can spend before you can determine what you can afford. You don’t want to get stuck making a bloated car payment that will leave you eating bologna sandwiches for three years. First you need to have a monthly budget. This is very easy to calculate. Add up all of your fixed monthly expenses, such as your rent/mortgage, phone bill, etc. Subtract that from your net income. Then subtract your estimated extraneous expenses, such as food, gas, entertainment, whatever. The result should be an amount of money you have to play with.

From that, you need to remember that buying a car involves more than a down payment and monthly payments. In your budget you will need to include licensing, registration and other hidden costs, as well as monthly insurance costs, gas and maintenance. Once you have all of this worked out, you should have a ballpark figure of the budgeted amount you can use for car payments. A good rule of thumb is roughly 20 percent of your net income can be used for a car payment. Once you determine that figure, stay with it.

2. Decide which car you want
Now that you have settled on a monthly allotment, now you can look at which vehicles fit into your price range.

This is really about personal choice, but a good criteria to go buy is to look