For a large portion of Americans, owning a car or having one accessible to us is essential to daily functions. Unfortunately, vehicles also often come with a hefty price tag not easily affordable for most households. When this is the case, an auto loan can become necessary.
Getting approved for an auto loan can be difficult for some consumers, especially if there’s a lower credit score or tarnished credit history involved. So, how do you get approved? The next time you’re car shopping, utilize these tips to get approved for an auto loan.
First things first, you should be very familiar with your credit history and score before you set out to take on a new loan or make a large purchase. You can sign up for free credit history and score monitoring with sites like Credit Karma. Your score is going to largely factor into what kind of loan terms you can qualify for, so you’ll want to make sure it’s in the best condition it can be before you go shopping.
Once you’ve checked your credit score and history if you find that it’s low or not where you want it to be, take an opportunity to fix what you can before moving forward. Pay attention to any problems or errors that you can potentially have removed, or what you can work on within the next few months (if purchasing a car isn’t an emergency). If you can raise your score even by 20 points it can lower the APR terms available to you by several digits.
Like home pre-approvals, auto loan pre-approval can give you that extra buying power that can mean all the difference when you’re purchasing a car. Check with a few different options and don’t limit yourself to just one area; apply with your local community bank, with an online lender, or with a large national bank. Try applying to 3-4 at one time and then compare quotes; each quote will most likely have its individual benefits. Pay attention to the APR offer, how long the loan term would be, what the taxes and fees are, and how much of a down payment you’ll need. Going through this process before you begin shopping will give you the extra time to consider what’s best for you and your budget.
Once you’ve secured a loan offer, it will make it easier to set a car buying budget. Utilize a local dealer or banks auto loan calculator when you do this to ensure taxes and fees are properly added into your budget estimate. Be sure to get an idea of what your monthly payment will be in accordance with how much you take the loan out for; the last thing you want to do is take out a loan that you’re going to struggle to repay.
Your pre-approval will make this process a lot more enjoyable and easier. Your pre-approved loan will allow you to shop knowing what brands or car types may be excluded in your loan if you are required to do business with certain dealers, and how much you can expect to pay when you find the car you’d like to purchase.
Once you’ve found the vehicle you’d like to purchase and have settled into the dealership’s finance office, you’ll need to review the terms of your loan offer to make sure everything is as it should be. Are there any hidden fees you weren’t expecting from the dealer? Was gap insurance added? How about the loan term - is it what you were expecting?
Now that you’ve purchased your new car, enjoy it! Make sure you don’t miss any payments, though!