FINANCIAL ADVICE | BUYING A HOME
How to Get Approved for a Car Loan
Published February 6, 2019
- Your credit score determines the interest rate on your car loan.
- Getting pre-approved for your loan before you go to the dealership.
- Each proposed loan contract will indicate the loan amount, the interest rate, the length of the loan and any fees.
Unless you already have the funds to pay for your new vehicle, you’ll probably need a car loan. And to get approved for that car loan, you may want to consider a few things that can improve your chances of getting approved for a great rate and payment.
The Higher Your Credit Score, The Better
Your credit score determines the interest rate on your car loan. If you have a high credit score, you will likely qualify for the best rates that lenders are offering. However if your credit score is on the lower end, you may want to take some action to improve your credit score.
Figure Out How Much You Can Afford Before You Apply
Assuming you know how much your monthly expenses are, you probably have some idea of how much of a monthly payment you can afford. With that piece of information, you can start to figure out the maximum loan amount you should take out, and therefore the maximum vehicle price you should shop for.
We suggest using our awesome Auto Loan Payment Calculator on our Auto Loan Page to evaluate which loan amount and term gives you the monthly payment you want.
Don’t forget to add the monthly costs of full-coverage insurance (covering injury to property and individuals), gas, maintenance, fees, and the monthly loan payment amount. Be generous when estimating these costs and it will help make sure that your car payment doesn’t become a struggle.
Initiate Your Car Loan Application With a Lender
Getting pre-approved for your loan before you go to the dealership allows you to arrive at a dealership with a loan for ‘up to but not exceeding’ a certain dollar amount and Loan-to-Value (LTV) ratio. A pre-approved loan can be arranged with a bank or credit union. Pre-approved loans are not required to be used in full or at all. That makes getting a pre-approved loan a great way to save time and energy at the dealership.
Provide All Requested Documentation To Your Lender
When you submit your loan application, your lender will require you to provide your basic personal information, a copy of your driver’s license, proof of insurance, permission to pull your credit report, proof of income, and potentially other items like proof of residence.
Prioritize Your Loan Payments Each Month
Each proposed loan contract will indicate the loan amount, the interest rate, the length of the loan and any fees. Review this carefully before signing! One you agree to the loan you must make repayments in full and on time. And perfect repayment history is a great way to boost your credit and ensure that you continue to qualify for any future loans you may apply for.
With proper preparation, getting approved for a loan is simple. Know the vehicle you want, make sure it fits your budget, shop around for the best terms, and have your paperwork in order. When you’re ready to apply, talk to the Auto Lending specialists at CUTX by visiting our Auto Loan page.