How To Qualify For An Auto Loan

by pps-DUEditor

Qualifying for an auto loan isn’t difficult, but getting the lowest interest rates and finding the best deal – that takes a little consideration and work. Here’s what you need to know.

Good Credit

Having a good credit score is essential if you want to get approved for an auto loan with decent terms. In general, an excellent FICO® Score☉ ranges from 670 to 739, though higher is better. A less-than-ideal credit score might still get loan approval though at a higher interest rate or need you to find a cosigner.

Regular Income

Having a steady income is essential to auto lenders because it improves the likelihood that you’ll make your monthly payments.

Proof of Identity and Residence

You may not need to provide this information if you’re getting a loan from a bank you use regularly. But, if you’re using a lender’s services for the first time, you may need to provide a government-issued ID and proof of residence.

Get Pre-approved

A lender can run a soft credit check and review your credit record to determine if you’ll get approved and what interest rate and other terms you might qualify for. While all lenders don’t offer pre-approval, going through the process with multiple lenders allows you to figure out who will give you the best loan terms.

Down Payment or Trade-In

Make the largest down payment you can afford or trade-in your current car to reduce your loan amount and get approved at a lower interest rate.

Financing at a Dealership

Most dealers reach out to multiple lenders at once to get quotes that they can share with you. Be sure to ask to see all the quotes, not just the ones they recommend. Some dealers offer special financing programs sponsored by the car’s manufacturer, though these require you to have excellent credit and agree to specific terms.

Bad Credit

Take your time shopping around to find lenders that offer pre-approval and can give you relatively decent terms. A reasonable down payment or trade-in value will also help you reduce the amount you need to borrow. If nothing else, consider getting a cosigner who has excellent credit to help you qualify for a better auto loan.

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