Car loans make it possible for almost anyone to purchase a car. Without car loans, you’d have to spend a lot of cash on a car, and for many Americans, that’s not possible. In fact, in the third quarter of 2022, more than 105 million car loans were outstanding. While loans are common and the process of getting one is straightforward, getting approved for a car loan comes down to several factors, like the loan amount and your down payment.
The good news is that we’re here to help. We’ll take you through the process of getting approved for a car loan and how you can prepare with some helpful tips.
Read on to learn everything you need to know.
How To Qualify for a Car Loan
Car loans are tricky, but dealerships make the process straightforward as long as you have all of your information. You’ll need a few things to qualify for a car loan, like credit history and documents to verify who you are.
Maintain a Good Credit Score
If you want to get approved for a car loan, having good credit helps. Most lenders will approve you for a car loan even if you have bad credit but having a score over 700 ensures that you get the best rates. Having a score that’s over 750 or 800 is even better and will get you the lowest interest rates possible. While you can get approved for a car loan with a score that’s in the 600s or lower, your interest rates will be higher. Making a down payment increases your chances of getting approved, or you can show pay stubs to show that you have enough income to purchase the vehicle.
Verify Your Identity
Lenders want to know who they’re lending money to, especially if you’re new in town or the country. Therefore, it’s important to provide documentation of your name, address, and work history. To prove who you are, you can use your driver’s license, passport, pay stubs, or even bills. Lenders will also run a background check in some cases, but these checks are more focused on viewing your credit records than your criminal records. Still, some things like bankruptcies and tax liens can reduce your chances of getting approved for a car loan.
Simply put, these are the two main factors that help you get approved for a car loan.
Tips for Getting Approved for a Car Loan
The process of getting approved for a car loan is simple, but there’s more to it when you have bad credit or can’t afford the car you want. Thankfully, we have some tips that will help you get approved.
Check Your Records Before You Apply
Checking your records before you apply for a car loan is the best way to prepare. Preparation is key, and knowing your records ensures that you can haggle with dealers/lenders properly. This is because many lenders will run a background check on you to verify your identity, work history, and credit score. Thankfully, there’s a simple way to check your records.
Websites like Information.com offer background check tools. These tools allow you to enter your full name, address, city, and state to learn more about your public records. After searching for yourself, you can view things like your credit score, identity, criminal records, and any other types of public records. Therefore, it’s the best way to know what you’re looking at before you even apply for a car loan.
Save for a Down Payment
When you don’t have enough cash to purchase a car, you’ll need a loan. While many people can finance the entirety of a vehicle, this isn’t the case for people who have bad credit. Additionally, the loan might be too expensive to have no money down. Lenders also prefer when you put money down because it makes the loan and monthly payments smaller. When it comes to car loans, try to put down 10 to 20 percent for the best chance to get approved for a car loan.
Provide Pay Stubs
Subpar credit doesn’t have to keep you from getting approval for a car loan. Many lenders will make exceptions because vehicles are necessary for people to make money in rural and suburban parts of the United States. In these cases, you might need to offer pay stubs to help you get approved for the car loan. Pay stubs can be directly from your employer, or if you’re a contractor, you can use income documents or provide access to your bank account transactions.
Consider a New Vehicle
It’s easier to get approved for a loan on a newer vehicle. While this might seem counterintuitive because newer vehicles are more expensive, lenders prefer a new vehicle because it’s less likely to give the owner problems. Car problems become expensive and may cause someone to miss payments, so sometimes a new vehicle can improve your approval chances. Depending on the lender, a car that’s usually less than four years old will qualify as a new car.
Following these tips will help you increase your approval odds for a car loan.
Get a Car Loan Today!
Car loans don’t have to be hard to get. Whether you’re buying a used car or something brand new, you can get a car loan fast if you come prepared. Always follow the guidelines that we provide for the best chance to get a loan, and make sure you’re prepared. Check your records and credit before having your credit fun at multiple dealers to avoid any potential complications.
As long as you follow our tips and prepare yourself for the process, you’ll have a new car in no time!
