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5 Tips to Get Approved for Your Car Loan

Car dealer giving keys of a new car to happy customer - a series of BUYING A NEW CAR images.

Buying a car is often stressful because there are so many different options available. It can also be incredibly time consuming to do all of the necessary research on the kind of car you need, how much you can afford, and how to get approved for your car loan. This article will provide the top tips for buying a car and getting the loan for your brand new car!

One of the more stressful aspects of purchasing a car is understanding the car loans. Investing in a car is an important part of modern life, but it doesn’t have to be nerve wracking when you have the right information.

Here are the top tips to getting the best loan for purchasing a car.

Have a Plan Before Getting Your Car Loan

Having a plan before you go look at cars and consider a loan can help you have a better understanding of what you are prepared to spend monthly for your car. It can also help you determine what kind of car you can afford. Most cars are available through a loan, but it is important to understand what you can afford before you are put in a high pressure situation with a car salesman. The difference between what the dealerships tell you is within your price range and what you should actually spend can be very different things.

Understand Your Credit Rating Before You Go to the Dealer

Unlike a credit card, you can get a loan to purchase a car even if you have poor credit. The only difference is that you will end up paying a lot more! This is because it is easier for a bank to repossess a car if you default on your payments. If you’re excited about purchasing a new car but you have shaky credit, you likely won’t ask if there are lower rates available. Most car dealers and salespeople know that if you have bad credit, they will be able to make more money off of your purchase!

Use free tools like Credit Karma or Experian to look at your credit score. You will be able to determine what the best loan rates will be for your current credit score. Most dealerships will focus their advertising dollars on promoting very impressive interest rates for new cars like 2.9% or even 0%. However, they don’t mention in the advertising that these rates are available for people who have incredible credit!

Get Quotes Before You Go

Even if you have great credit, it is important to get an idea of what you might be spending before purchasing a car. If you don’t have perfect credit you can use online lenders. They will present you with an interest rate that you will be able to spend on the car. Local banks and credit unions will often offer people who have average credit great rates for car loans for both new and used cars.

Put 20% Down

You should be focused on getting a shorter loan term because it will keep your interest rate low. However, you should also be paying 20% at the minimum when you walk out with your new car. If you have good credit, many dealerships will try to tempt you with no down payments. However, a large down payment will ensure that if you need to sell your new car, you likely won’t owe more on the car than it is currently worth.

Pay For Fees and Taxes or Other Extras with Cash

Don’t focus on added miscellaneous expenses to your vehicle if you can’t pay for them in cash. Pay for the expenses like taxes, documentation fees, and registration fees with cash instead of the loan. Some dealerships will try to get the last penny out of you and will try to roll this into your financing, causing you to spend more than you need to! Don’t increase the amount of your loan without ensuring the car is more valuable because of it!

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5 Tips to Get Approved for Your Car Loan