When it comes time to buy a car, you could always pay in cash. However, most likely you are going to need to take out a car or auto loan to pay for your new vehicle. Many people are aware of this but may still face issues when trying to get approved for a car loan. Luckily, there are several tips you can employ to better your chances of getting approved for an auto loan and driving that new car off the lot. Here is what you need to know.
Know Your Credit Score
Your credit score is a huge determinate of whether or not you can get approved for a car loan. Those with bad credit are much more likely to be turned down for an auto loan than someone with a good credit score and credit history. If you don’t have good credit, now is the time to start working on improving it. You should also review your credit report to look for unusual activity or areas where you can improve your credit score.
Know Your Budget
Before you go and buy a brand-new car, you need to know your budget. This will come down to your total monthly expenses versus your total monthly income, and trust me, lenders will check your income versus expenses when considering offering you a loan. If you don’t have a budget, you can create one by starting with your monthly income and subtracting your monthly expenses. What you have room for will determine your budget and what kind of car you can afford.
Never go to the car lot before you get pre-approval from a lender. Why? Well, receiving pre-approval will tell you how much you are eligible to receive, which means you can pick out a car based on your pre-approval budget. This also makes it easier for you when trying to choose a car. Pre-approval also gives you more peace of mind when you go to the lender for your final loan application. Remember that the loan is never a done deal until you’ve signed on the dotted line.
You don’t have to go with the first lender that you find. While it is good to use local credit unions or banks, you can also look online for other lending opportunities. When you have many different options, you can choose the best interest rate and features that make it easier for you in the long-run. However, you should note that when applying for a loan, the lender will generally check your credit history, which can lower your credit score. If you keep all your loan paperwork together from the past 14 days, they can be filed together to put less of a damper on your credit score.
When buying a car through an auto loan or auto financing, it can often be hard to get approval from the lender. Luckily, following the tips listed above can help your car buying experience run smoother and help you get approval in the long-run. Budgeting and good credit are key to auto loan approval and should be the first steps toward buying a car.