How to Drive Off With A Pre-Approved Car Loan

Choosing a new car is hassle enough itself. Getting financing in order does not have to be. Before you start shopping for a car, have your financing lined up with a pre-approved car loan.

You have probably heard the terms “prequalified” and “preapproved”. Both are helpful steps but which one should you go for? Well, let’s take a look.

Getting prequalified is a simpler process but it gives you a more vague answer. Basically, a lender will take a quick look at your credit- a soft credit pull- and tell you what you might qualify for based on the limited information. Sure, it can be helpful, but it might change when they do the hard credit pull. Getting prequalified is like saying “Maybe you can get this loan”.

Getting a pre-approved car loan is a bit different.

Steps to Get a Pre-approved Car Loan

In this case, the car loan process is a bit more complicated. The lender does a hard pull on your credit. There is a deep dive into your credit score and report, giving them a good look at how you handle your finances. If you do get a pre-approved car loan, it is basically saying, “According to your current information, we should be able to loan you X amount at X percent interest.” Of course, if anything changes in the meantime, it can change your preapproval, but as long as it stays the same, you should get the pre-approved car loan amount at the offered interest rate.

Now, let’s take a look at how to get an auto loan.

Assess Your Finances

Before you even begin to look for a loan, you need to take a look at your current financial situation. Answer the following questions:

These are just a few things to look at to determine if getting a new car auto loan is a good idea at the time. As you look at your finances, you may notice things I have not yet mentioned. Just be sure you take it all into account.

Make a Budget

Next, you need to make a budget for a new car. Compare your incoming to your outgoing money. How much can you afford to pay each month on a loan payment?

It is important that you figure this out before speaking to a lender for a very important reason: They do not take your entire situation into account. When a lender determines how much to loan you, they are going by what they think you can afford.

The problem is that they are only looking at your regular documented bills. If you pay out $100 to charity each month or $50 for your daughter’s dance class, those numbers likely will not be factored in. Vacation money, date night cash, and birthdays are not typically factored in either.

This is why you have to look at everything yourself. You need to calculate everything you payout on a weekly, monthly, and yearly basis. Try not to leave anything out, no matter how insignificant it may seem. Only after you cannot think of another thing, then determine what you can spend out each month. Have this number in mind when you speak to lenders so you are not talked into borrowing more than you can afford.

Shop Rates

This is a biggie: You have to shop around for the best interest rates. Even one or two percent difference in rates can add up to a large amount. You want to find the absolute lowest rate that you can get.

Shop Cars

I am not yet talking about actually shopping for the car. I mean you should go ahead and figure out what kind of car you want. What does this have to do with getting a pre-approved car loan? Well, a couple of things.

First of all, the type of car you want determines the amount you need to borrow. By having two or three cars that you like in mind, you will know when you apply for a preapproval whether or not that lender can offer you enough to cover the car. If not, you will either know you need to find a new car or that you need to work on your financial situation before buying.

Another thing is that some lenders only work with certain types of cars. Some will not work with certain makes and models- mostly because they want to know the car will be valuable enough to sell should you not make your payments. Some only work with cars made after a certain year. Others require the car to have under a specific amount of miles. Having all of this information cleared up beforehand will help you narrow down lenders to apply with.

Shop Dealerships

While this is a little rarer, it is still important enough to mention: Some lenders will only loan money for automobiles from certain dealerships in the area. This may seem a little crazy, but you have to remember that if you decide not to make your payments, the lender is stuck figuring out what to do with the car to get their money back. They want to know that the dealer you are purchasing the car from does not have a history of selling cars in bad shape or something equally horrible. You might not run into this issue, but it is still something to ask different lenders before applying with them.


Your next step is to apply at the lenders you have chosen- preferably at least two or three, but more gives you a better comparison. By getting multiple pre-approved car loans, you can make sure that you are choosing the best one. Never settle for a loan until you have at least a couple of more to compare it to.

I understand that the idea of filling out several applications is exhausting, but it doesn’t have to be. Thanks to our digital age, you can now apply for loans- including car loans- online. Even better, if you choose a platform that is connected to a network of lenders, you can fill out most of your information just once.

I also want to point out the fact that you should do all of your applications within two weeks. Every time you apply for a loan- even for a pre-approval- it is a hard hit on your credit, which can bring your score down. If you apply for car loans in a spread-out period, each application will be a hard hit. However, if you do all of your applications for one industry- i.e. auto loan, mortgage, and so on- within two weeks, it only puts one hard hit on your credit.

Benefits of Getting a Pre-approved Car Loan

Most people do not apply for credit for a vehicle until they are at the dealership. Getting a pre-approved car loan before visiting the dealership, though, provides several benefits.

Know What You Can Afford

Your preapproval will give you the amount you will likely be able to borrow. This means that when you begin to shop for a car, you know what price range you should look at. This benefit alone is worth the trouble. It can keep you from overspending or tell you if you will need a secondary source to help cover your vehicle.

Know What Monthly Payments Will Be

When you get a pre-approved car loan, the lender should give you the information you need upfront. That includes what your monthly payments will be. If the payments will be too high for you, you will know to either look for another car loan or not spend the full amount of your pre-approved car loan.

You Can Shop Like a Cash Buyer

You have probably heard the term “Money talks”. This happens to be very true. If you can take cash to purchases for homes, vehicles, and a few other items, you have much stronger negotiation power.

Having a pre-approved car loan lets you do just that. Taking your approval note from your lender is like taking a blank check to the dealership. You can say, “This is my preapproval and this is what I am willing to spend”. Salespeople love when customers come with cash and will work with you to get the car you want.

Choose and Finalize Your Loan Within 30 to 60 Days

Pre-approvals are usually only valid for 30 to 60 days depending on the lender. A lot can change quickly, so just because you get approved now does not necessarily mean you can get approved again. Once you have chosen your lender, you need to find your car and finalize the paperwork as soon as possible.

That is actually another reason I said you should already have an idea of what car you want and where you are thinking of purchasing it. If you have these preliminary decisions out of the way, you can finalize your loan in plenty of time without having to rush.

Before you finalize the loan, though, take a moment to really look it over. Be sure that you know what is expected of you, any fees you could end up paying, how much your monthly payments are and where they need to be paid, and anything else that is valid to you successfully repaying the loan. This also gives you one last chance to make sure that everything in the paperwork is what you previously discussed with the lender. You do not want any surprises later.

What to Do If You Cannot Get a Pre-approved Car Loan

Of course, there is always a chance that you do not get a pre-approval. Different factors could prevent a lender from feeling comfortable enough to loan you money. What do you do then?

First off, try to find out why you did not get approved. Sometimes a lender can tell you this immediately. Others usually send out a letter of denial within a week or so pointing out things that might have caused the rejection. If you can figure out what is wrong, you can make a plan to fix it. Most often, you will need to do one of the following:

Work on Your Credit

This is usually the big one. Your credit is the lender’s reference point for whether or not it is safe to loan you money. They look at things like how much debt you are in, what type of debt it is, what your payment history looks like, whether or not you have any bankruptcies or judgments recently, and more.

If you are turned down due to your credit, take a look at those areas. If you need help, websites like Credit Karma can be a great tool. Not only can you check your credit score and look at your credit report, but the website also gives you tips on what needs to be fixed. It breaks down different sections of your credit and tells you where you stand with that section. This is a good place to start if you are rejected.

Increase Your Income

Another factor that can impact your potential pre-approval is your income. Actually, it is your debt to income ratio (DTI). This is the amount you payout compared to what you bring in. If your debt is too high or your income too low, the lender will think you cannot make your payments and reject you.

There are two ways to fix this: Increase your income or decrease your debt. In many people’s cases, it would take a combination of these ways to make it work. The more you can increase your income while decreasing your debt, the quicker you can make a big enough change to get your pre-approval.

Increase Your Savings

it is not always necessary for you to have money that you can put down on a car, but it sure never hurts. If you do not have any money for your car or just do not have enough, try to grow your savings. This can help in three ways: First off, the lender will see that you are serious because you have skin in the game, so to speak.

The second reason is that if you can put anything toward the car, it decreases the amount of loan you need. This not only gives you a better chance of getting a loan but also means you owe less back- which is a really good thing since we are talking about adding interest here.

The last reason is similar to the others but works a little differently. We talked earlier about secured loans, aka using collateral. You can actually use your savings or an investment account as collateral. So- again- with collateral, you can typically get approved for a larger loan amount with a lower interest rate. And, of course, all of that is good.

If you have been denied credit and you can manage it, try putting away at least $1000 to $2000, but the more, the better.


Getting a pre-approved car loan is not as tough as many think. If you follow these steps, you should find yourself with a pre-approval soon or- at the very least- a plan on how to get that pre-approved car loan. Just remember that if you don’t succeed the first time, don’t give up. Keep pushing forward until you get what you are looking for.

Online Auto Loans Open Anywhere at Anytime

Here’s a recent headline from Forbes that kinda says it all:

Cars Are Costing More Than Ever To Purchase, Finance, And Own, Yet Consumers Remain Unfazed

On the one hand, here’s to capitalism and an American economy that allows you to purchase the vehicle you need (or at least want) through creative financing and good ol’ competitive lending. On the other…

Consumers are coping with rising prices and financing costs largely by extending their car-loan terms… Unfortunately, on average, for every 12 months a car loan is extended it will cost an owner nearly $1,000 in additional finance charges.

Ouch. And it doesn’t stop there.

Due to rising interest rates and other factors, the AAA says the average yearly cost of vehicle ownership has likewise risen to a record peak at $9,282, or $773.50 a month. Higher financing rates account for 40% of the rise in overall ownership expenses…

You get the idea. What does this mean for you as you consider your next vehicle?

I’m In Love With My Car

It’s not like most of us can simply do without. Sure, Americans in larger cities can get along quite contentedly with public transportation. And maybe a bicycle or Segway or something. For the rest of us, however, we pretty much have to have a car or truck. Otherwise, we can’t get to work, take the kids to soccer practice, and buy groceries. Just as important, our car is where we listen to our music or enjoy our podcasts. It’s where we think our own thoughts and process our day. It’s more than transportation – it’s a refuge.

So let’s assume you gotta have a vehicle. Statistics say they’re getting more expensive and people are paying more to finance them. How do you secure a car or truck that meets your logistical needs and maybe fulfills at least a few of your auto-related hopes and emotions, all without taking on unnecessary debt or getting yourself into credit trouble?

Let’s talk about logistics before you run out and start test-driving anything.

How Do Auto Loans Work?

It sounds like a silly question, but it’s something many people don’t adequately consider before they find themselves sitting in some salesperson’s office talking about whether or not they need to add on the upholstery protection package.

Where Can I Get A Loan?

Because of the cost of most automobiles, new or used, it’s traditional for buyers to finance vehicle purchases. This can be done in several different ways. Your local bank or credit union probably have published rates for automobile loans. You can even get pre-approved so that by the time you actually go car-shopping, you know how much you can afford to spend and approximately what sort of monthly payment you’d be committing to.

In the 21st century, there are numerous online auto lenders as well ready to compete for your business. Some even specialize in used car loans or auto loans for bad credit, for example. Auto loans online have the advantage of efficiency – you can usually go through the entire process without leaving your house, and approval times tend to be faster than with traditional lending institutions.

Interest rates for online auto loans are very competitive since many online lenders are designed to be efficient and operate in very competitive conditions. You won’t be sitting across a desk trying to persuade a guy in a suit that you’re worthy; online lenders will be working to earn your business and keep you happy. That’s how they succeed. We’ll talk more about how to find the most reputable and reliable online lenders in a moment.

How Does The Loan Work?

Traditional auto loans (including online auto loans) are term loans at fixed interest rates. That means that once you’re approved, you’ll be presented with a fixed number of monthly payments at an unchanging interest rate until the vehicle is paid in full. The advantage to this is that there are no surprises – your payments come due at the same time every month and stay the same throughout the life of the loan.

That doesn’t mean there are no variations. Or that it’s impossible to make adjustments if your circumstances change. But unless otherwise specified, auto loans are pretty straightforward.  Be aware, however, that any number of things can influence just how much that monthly payment might be. You may also encounter some very tempting alternative forms of financing. In such cases, it’s all about the details. You might save thousands, or spend thousands more in unexpected fees or additional interest. Always pay attention to the specifics, and don’t hesitate to ask questions!

How To Get An Auto Loan

On the one hand, as we discussed above, most auto loans are fairly straightforward in terms of how they’re structured. On the other, there are several considerations you should be aware of before you get too far in the car-buying process. So let’s see how can you get an auto loan.

The first – and it’s a big one – is the question of where you want to finance. There are three basic options: a local bank or credit union, one of the many online lenders available in the 21st century, or the dealership where you purchase your vehicle. For either of the first two, it’s usually wisest to talk about your options before you shop for a specific vehicle. Most local banks and credit unions, as well as lenders specializing in online auto loans, have procedures by which they can pre-approve you for a specific amount. That way, by the time you’re actually shopping, you know exactly how much you can afford and what you’ll be paying monthly if you decide to commit.

You’ll want to be prepared with documentation of things like your income over the past year, employment information, and other basics. While it may not be essential at this stage, you should at least be thinking about whether or not you’re likely to trade in your existing vehicle or make a substantial down payment on your new purchase. Finally, you should have a pretty good idea whether you’ll be focusing on new or used vehicles as you shop.

Online Auto Loans

Exploring your online options can be a bit daunting without guidance. We do many things here at Loanry, but one of the biggest is connecting borrowers with reputable online lenders. Don’t worry, we’re not going to charge you for anything, and we don’t loan money ourselves. Instead, we gather some basic information about who you are and what you’re looking for. We can help you get your own copy of your credit scores or even your full credit report absolutely free. Our online tools, such as our online loan calculator, can even help you play with the numbers ahead of time so you feel more confident going in.

There are several advantages to online auto loans. The most obvious is that the entire process takes place online. You can do it any time of day or night from wherever you happen to be. Who would have thought only a generation ago that you could receive multiple offers from lenders competing for your business while sitting in your underwear in the middle of the night eating Corn Nuts?

That’s not required or anything, but it does highlight the convenience of online auto loans. Those Corn Nuts probably aren’t doing your keyboard any favors, though.

If you have a decent credit history, online auto loans tend to offer very competitive interest rates and other terms. You may have the pre-approval or the money in your account as early as the next day

What Role Does My Credit Play When I Want an Online Auto Loan?

The short answer is “a big one.”

Your three-digit credit score and your credit history are major factors in whether or not lenders are willing to extend you the loan you’re seeking for the car or truck you want. Now for those of you who aren’t familiar with credit scores. There are two common forms of this magical number – the FICO and the VantageScore. While computed slightly differently, each results in a number between 300 – 850. This acts as a “snapshot” of your overall creditworthiness for lenders. Each one considers your payment history, your current debt or debt-to-credit ratio. And overall reliability when it comes to various forms of credit extended to you in the past.

Auto lenders, including those specializing in online auto loans, sometimes modify these numbers to give extra weight to your auto loan history specifically. After all, they’re primarily concerned with whether or not you’re likely to pay for the car or truck you’re trying to buy. Not your track record with your landlord, the credit card companies, or your past due medical bills. It’s not that those things don’t matter. But sometimes your payment history with the same sort of loan they’re considering extending to you matters more.

The advantage (and arguably the major limitation) of a three-digit credit score is that it’s straightforward and easy to compare to whatever internal charts or tables a lender might use to determine what sort of interest rate to offer you, or whether to offer you a loan at all. Some lenders, particularly those offering online auto loans, want to look a bit deeper. They’re looking for reasons to say yes, not reasons to turn you down. In that case, they’ll probably look at your full credit report.

Your credit report has a detailed history of every loan you’ve ever taken out and how you did repaying them. It will show your employment history, where you’ve lived, and all sorts of other details about you. If you had a rough patch several years ago, but have been regularly employed and paying your bills on time more recently, that will be easier to establish with a credit report than simply looking at a credit score. If you’d like to know more about the role of your credit in financing a vehicle, my colleague Julia Peoples elaborated about it recently in a piece well-worth checking out.

Online Auto Loans With Bad Credit

A rocky credit history will make any loan more difficult, but it doesn’t necessarily disqualify you from getting the car you want. Many online lenders specialize in loans for people with bad credit, or with very little credit history at all. Be aware you will probably be looking at a few fees upfront and possibly stiffer penalties for any late payments. Interest rates will be higher as well because the risk to the lender is greater. Make sure you’re OK with the terms and that you can realistically make your monthly payments for the life of the loan before committing, even if you really really really want this vehicle!

If you do choose to move forward with the loan, be aware that every payment you make – or don’t – impacts your credit rating and overall credit history. Online auto loans for bad credit can be an opportunity to not only drive away with the car or truck you’ve been wanting, but to rebuild your credit and establish a positive history with a lender you may wish to utilize again someday.

There are other options to consider if you have less-than-perfect credit. You can use these in conjunction with whatever loan you manage to negotiate or try one or all of them separately.

The first option is a co-signer. This would be someone with a strong credit history who trusts you enough to put their credit rating on the line to help you out. If you make your payments as scheduled, your credit record improves without any change to theirs. If you don’t, their credit record is damaged and they may eventually be expected to pay what you’ve promised. That makes this a big deal and not something to be taken lightly. Money matters, but so do relationships, yes?

The second option is to make a substantial down payment. There’s a difference between having a shaky credit history and being completely without resources. Saving money isn’t always easy, but even a few thousand dollars down can make a huge difference in your monthly payments, interest rates, and even the willingness of lenders to take a chance on you. This tends to be true of traditional lenders as well as online auto loans.

A third option is to challenge any inaccuracies on your credit report, or to spend six months or a year working on your credit rating before you apply for a loan. This can be tedious, but even a few minor errors on a credit report can impact how a potential lender views your potential. You should avoid anyone promising to work miracles with your credit rating in a short time – especially if they want to charge you. There’s nothing they can do that you can’t do yourself for free. But one nice thing about bad credit history is that there are limits to how far back lenders look. Even a few small moves forward can make a big difference when it’s time to actually apply for a loan.

Finally, you can consider a less-expensive vehicle. Maybe the car or truck you really want is new or relatively new. But the dealer has an older option with similar features and a decent used vehicle warranty. It may be easier to borrow a much lower amount. And timely repayment improves your credit history just as reliably as paying twice as much would do. It’s not always easy to compromise. But try to look at the big picture and the long game as well as the immediate situation.

Trade-Ins, Down Payments, and New vs. Used

Trade-ins are a crapshoot with car dealers. It’s difficult to know how much they’re really giving you, but you can at least go into the process with a blue book value for your existing car and do a little research about the most likely vehicles you’d like to buy and what they’re selling for in your area. It can be tedious, but it can also save you literally thousands of dollars over the life of the loan – and that ain’t nothing.

Down payments are a bit more straightforward. If you can reasonably afford to pay even a few thousand dollars down on your new purchase, it can shave a substantial amount off of your monthly payments. It might also allow you to shorten the life of the loan, which saves you even more on interest over the life of the loan. What might seem like a small chunk each month adds up quickly in three or four years.

Finally, buying a new car vs. purchasing used is a major decision. New vehicles are, of course, new – which certainly has appeal. The smell alone may feel worth the extra money and extended life of the loan! Then again, you can buy “new car smell” in a spray and shave off up to half the cost of the vehicle… so there’s that. Generally, you’ll find financing a new vehicle to be a bit easier. The car or truck itself acts as natural collateral for the loan. And dealers are generally anxious to move new cars and trucks off the lot more than they are their inventory of used vehicles. Used cars, of course, cost considerably less to begin with. Some dealers offer pretty solid warranties on their previously owned inventory. And insurance will be much less than it will for a new vehicle.

It’s all up to you, but these are decisions that are much easier to think about before you’re standing on the lot, staring down the row of shiny new toys. But I digress – we were talking about where to look for the best loans…

Dealership Financing

Dealer financing is in many ways similar to what you’ll find at your local bank or credit union or with most online auto loans. But it can present a few wrinkles which may be to your advantage or may not. One of the biggest factors is that if you’re sitting at the dealership talking about financing, you’ve probably already selected a car or truck you’d really like to drive home. Needless to say, that can change the dynamics of the financing discussion considerably. We want you to have the vehicle of your choice, but that shouldn’t lead you to skim through details that might end up costing you more than you realize over the life of the loan.

Most major dealerships have their own financing departments. This can be advantageous to you. Because it’s not unheard of for dealers in need of moving product off the lot to cut some great deals on price. Knowing they’ll make up some of the difference through their financing. You’ll also no doubt hear of special financing offers throughout the year – no money down, zero percent interest, etc. These also tend to come when dealers are in need of moving vehicles. Finally, dealership financing is available whenever the dealership is open – nights, weekends, whatever. When you’re ready to buy, they’re ready to finance you. (Then again, that’s true of online auto loans as well – but still…)

On the flip side, dealerships know that in the 21st century, they can’t make the sorts of margins they used to on each car or truck they sell. The internet and the proliferation of information available to consumers means they have to become increasingly creative about where they can squeeze out profits. If you’ve bought a new car in the past, you know how quickly the “oh-by-the-ways” add up after you think the price is settled.

“Oh, by the way – there’s a fee for driving the car off the lot. Standard stuff, don’t worry about it.”

“Oh, by the way – you’ll want the extended warranty on parts and transmission. Pretty typical, I’ll just add that on.”

“Oh, by the way – you should get this extra thing here everyone does. It’s on line 72 there. Can you initial next to that?”

“Oh, by the way – local taxes and fees. And tag and wheel-cleaning surcharge. And the cost of all these spotlights and balloons… just sign right there at the bottom…”

it’s not unheard of for dealers to slip in extra fees or charges to the financing paperwork. They know you’re anxious to wrap it up at that point. And unlikely to argue over a few hundred dollars here or a few monthly add-ons there. And maybe you won’t. But don’t let your desire to get on the road persuade you to smile and nod and sign on the dotted line. You haven’t committed yet, and if you don’t like what they’re offering, you can still walk away.

Honestly, more of us should sometimes.

Finally, don’t get fixated on the monthly payment being offered. It matters, absolutely – it’s very important that you be able to confidently make that payment every month on time. But look at the cost over the life of the loan as well. Manageable payments for an extended number of months still add up to a major investment. Don’t sign until all of the numbers make sense to you and your questions are answered.


It may seem a bit overwhelming, considering everything at once, but you’re going to do fine. The key is to keep your information organized and not let yourself be rushed into anything you’re not comfortable doing. Sit down with several lenders and explore online auto loans as quickly or as methodically as you choose. Don’t let dealers persuade you that you have to leave with a car or truck the first time you visit. Or the second, or the third. Buy when you’re ready to buy.

We can’t tell you which vehicle is best for you. And we’re not going to tell you what offers to accept. Or whether to accept any of them at all. Our expertise is connecting buyers with online auto lenders who then compete to offer you online auto loans. This flips the traditional dynamic associated with getting an auto loan or any other kind of financing. There’s no reason you should go from lender to lender begging for credit. You’re the customer, whatever your credit rating or credit past. They should be working for your business, not the other way around.

We’d like to think it doesn’t stop with a car loan or any other single transaction. At OfferEdge, we’d like to become part of your overall financial health and progress. Whether it’s loans, investments, taxes, budgeting, or anything else related to making your money work for you instead of you always working for your money, let us show you what we can do. Maybe it’s a little idealistic, but we believe things can be better than this.

In the meantime, let’s see what we can do about hooking you up with those lenders. Just between you and me, I’d pass on the upholstery protection package.

Used Car Loans with a Green Light Approach

If you shop for your auto loan when buying a used car, it puts you in a better negotiation position and can save you the money over the life of your loan.

Need to Know Information about Used Car Loans

There are different things you need to keep in mind before you apply for used car loans.

Interest Rates

The interest rate you get will depend on your income and credit score, the length of the loan, and the vehicle. If you have a loan and make consistent payments and your credit score improves then you could also refinance your used car loan to get a better rate.

Loan Terms

Some lenders will offer loans for up to 84 months. It’s best to pay off a car loan as soon as you can since cars, whether they are used or not, depreciate quickly. Owing more on the loan than your car is worth means that you are under water, which can be a bad financial situation. The best interest rates are also available on shorter loan terms. It’s recommended that you have a 36-month loan for used cars.

Hard vs. Soft Credit Pull

Some lenders will do a soft pull on your credit to get you prequalified for the loan. This won’t do damage to your credit score but it also doesn’t mean that you are guaranteed approval or will get the quoted rate. Other providers will run a full credit check. A full credit check temporarily lowers your credit score by a few points. Even with a hard credit check, the interest rate could still differ from what you were quoted. A hard pull is required before the loan is finalized.


There are some lenders that only work with a certain network of dealers. Other lenders don’t lend money when you are buying a used car from a private seller. Lenders can also exclude some types, makes, or models of a car for your used car loans.

Why Preapproval Is Necessary for Used Car Loans

Preapproval for used car loans can help you with the negotiation process and get you in a car quickly. With preapproval, you can avoid the favorite tactic of a car salesman: the monthly payment. If you are negotiating based on the monthly payment, it can be easy to lose sight of the real price of the car. However, when you are preapproved, you are a cash buyer. This means you can concentrate on negotiating the price of the car instead of having to mentally juggle many different figures.

Negotiating the best deal for your car can help you cover any fees and taxes. If you are at a dealership, the finance manager may try to beat the interest rate of your preapproved loan. If the interest rate is lower and the terms are the same, you can take the loan. However, you want to review the contract carefully before signing. There is the risk that the finance manager could juggle numbers in the dealership’s favor instead of yours.

Where to Shop for Used Car Loans

The auto finance business is large and there are hundreds of different institutions making billions of dollars on used car loans every year. This means it can be hard to determine the right place to find a used car loans. The largest lenders are the big national banks but it’s important to remember there are other options out there.


Banks will usually have conservative and very specific loan polices. Some banks may only cater to borrowers with a better credit standing. These institutions are then offering some competitive loan rates. The offerings with banks vary and some banks are more willing than others to give loans to people with bad credit.

You likely already have a good relationship with at least one bank so your local branch can be a good place to start. Many banks also have websites that make it easy to check current rates. When you visit the branch, it can be a good way to avoid any misunderstanding and mistakes and it could result in you getting a better offer.

Credit Unions

These lenders do operate a little bit differently than banks but have lower operating costs than banks. Many credit unions will only lend money to their members. However, some also make loans to other people that may not have accounts with them. You may get lower interest rates, better and more personalized service, and have an easy loan application process.

Online Lenders

Online can be a very convenient way to borrow money and it’s much easier to find competitive rates. As a precaution, you should check the Better Business Bureau rating for every lender before you file an application online. You can apply to different lenders at once without it having an impact on your credit score. You also can get more competitive rates than traditional banks. However, it can be hard to reach a person for assistance and you can be bombarded with calls and emails from different lenders. You can also look at our selection of lenders here on Loanry.

Finance Companies

Finance companies used to be more popular in the past. These companies only make loans and don’t offer many of the other products that are typically offered by financial institutions, including checking accounts. Instead, these companies borrow money for banks and then lend to you. Many finance companies cater to niche customers in the auto loan market, such as those with bad credit.


Dealers will typically work with the financial group of the automaker, along with banks and other sources. Shoppers with offers from some of the other sources can negotiate the dealer’s initial loan quote into something more attractive, which is why it’s necessary to do research. Getting your financing from the dealership is convenient since you are already there. However, the interest rate can be higher in order for the dealer to make a profit and may only be available to those with great credit scores.

How to Get an Auto Loan

If you are going to borrow money for a car purchase, it’s important to shop around in order to get the best possible rate.

How Much You Can Spend

The first step when learning how to get an auto loan is to determine how much you can afford to spend. Ideally, you want to pay off the car within three years since this can cut down on the interest you will pay and help prevent you from becoming underwater. You may qualify to borrow more money in order to purchase a nicer car but this doesn’t mean that you should do so. Just because you can afford the payment doesn’t mean that it makes financial sense to do so. You don’t want to be unable to afford your payments.

Start Auto Shopping

Start with banks and credit unions to see what the interest rates are. It’s important that you do a lot of research in this step. You should also look at other ways to save on your loan. This can include setting up automatic payments or switching banks in order to qualify for a lower interest rate.

Be Prepared with Your Financial Information

When you are going through the preapproval process, you could be required to provide proof of your income. If you aren’t required to do this during this stage then you will be required to do this when you sign the loan. Some companies are stricter about the preapproval process than others. If you are not able to save up for an auto loan then you need to save up and purchase the car with cash, which will limit your options.

Start Shopping for a Car

Once you have been preapproved then the fun part of shopping for a car begins. Take the time to look for the best car available and you shouldn’t be afraid to negotiate a lower price. If you are able to secure your own financing then you have leverage sine you aren’t depending on the dealership for financing. When shopping for a car, you could be tempted to trade in your old car. It may be better financially if you sell your old car and apply the funds to a new down payment. You shouldn’t roll any current car loan into a new one. This causes you to be upside down on your new car.

Other Tips for an Auto Loan and Car Shopping

When shopping for used car loans, there are some other tips to keep in mind to save you money. Buying a car is not an investment. Even if you shop for a used car, you are still taking a loss as it depreciates. When not relying on dealership financing, you should negotiate as much as possible. This can save you a lot of money. You should have the used car checked by a mechanic before you purchase it.

This is even more important if you don’t know anything about cars. This prevents you from buying a car that will need a lot of repairs or has already been in a serious accident. Be ready to have car insurance as soon as you are purchasing the car. If you already have insurance, you can add the new car to your existing policy. If you don’t have an existing policy then you need to set up one.

You don’t want to finance the fees and extras. It can be easy to roll any fees into the financing but this is a bad idea. And it can make your loan exceed the value of your car and then puts you in financial trouble should anything happen to your car. Also, it adds to the true cost of the items you are adding. For example, if your dealer tells you that a paint protection package adds just $15 a month to the payment, unless you do the math you won’t realize it can cost you $1,080 plus interest on a six-year loan.

Many lenders will be willing to loan you the money for six or even eight years and this can give you a lower payment. It’s also a risky financial move. Long car loans usually have higher interest rates and can be more expensive in the long run. Even if you do qualify for this then you risk having the car‘s depreciation outpace the rate you are paying it back.

Why Does Used Car Financing Cost More?

When you start shopping for a used car and financing you will see that it typically comes with higher interest rates and shorter loan terms than you find on new car loans. There are also restrictions on the value of the vehicle and the age. The reason for this is the risk of the loan. Lenders have found that there is more risk when they lend money on used cars. The additional costs that lenders face means higher interest rates.

The short term and other restrictions can lower the likelihood that the lenders take a major loss. Depending on the car you choose, some lenders can treat it as a new car. Vehicles that have lower miles or aren’t very old will be treated this way. Some lenders also offer new car interest rates for any manufacturer-certified used cars.

Comparing Used Car Loans

When comparing options for used car loans, it’s very tempting to just look at the monthly payment. This is not the only thing you should be focusing on in order to determine if it’s a good offer or not. Some lenders have variable rate loans but most borrowers will seek fixed loans.

Instead of looking at monthly payments, you want to look at the total cost of the car, including the total of all the payments during the loan and the amount you have to pay upfront with fees. You can use a used car loan calculator to help you figure this out. Here is an example. If you are buying a three-year-old SUV for $25,000 and have $5,000 for the down payment, this means you need a loan for $20,000.

The best offer you can find is a five-year auto loan at a 6% annual percentage rate. Using the calculator, you see that the monthly payment is $387. You then multiply that by 60 since that is the number of months you will be paying. This means the total cost is $28,220. If you choose a three-year loan with a 4.5% interest rate, this increases your payments to $595 a month but then the total cost is only $26,420. This can save you more money if you are able to work that payment into your budget.

Working with the Dealer on Your Used Car Purchase

When you have financing in place, you then need to start shopping for the car. Buying a used car can involve some more steps than when you are buying new. You want to make sure to get a vehicle history report. If the dealer resists your efforts for this then you should walk away from the deal.

Car salespeople usually try to merge the price of the car, trade-in, and financing into one transaction. When they bundle the deal, it can allow them to move savings and costs from one part of the deal to another. This confuses you about whether you are getting a good deal or not. For example, they could be able to give you a great trade-in deal but then they are boosting the cost of the car you are buying. You want to keep each transaction separate to focus on the price of the vehicle you are considering. Be polite but firm throughout the negotiation process. You want to get the best deal you can but they want to earn profit. Keep in mind that you may only buy a car every few years but they do this every day.

You are more likely to get a good deal on a used car if you make a larger down payment. Putting money down reduces the amount you have to finance and this gives you lower monthly payments or a shorter loan term. It can lower your loan-to-value ratio, which shows how much the car is worth in proportion to how much you owe on it. The lower the number, the more likely you are to get a better deal. A substantial down payment reduces the possibility that you will owe more than the car is worth.

Watch out for yo-yo financing. Dealers let you take the car home with the financing paperwork set. Then you get a call from the dealer saying that the financing fell through and then you need to sign different papers. Those new papers cost more than what you negotiated earlier. Sometimes there can be legitimate problems with financing but many times the dealership knows all along that you don’t qualify. You get to take the car home so you get attached and then are willing to pay the higher cost.

Working with a Private Party for Your Used Car Purchase

When you going to purchase a used car from a private party, you have no choice but to get financing from a credit union or a bank since you won’t be able to use dealership financing. It’s important that you get a vehicle history report since some lenders offer them as a benefit of you using their auto financing. Unlike when you work with a dealer, you have to do the paperwork yourself and ensure that you transfer the title to your financial institution. Some private sellers can accept peer-to-peer financing and take the third-party lender out of the picture. This auto financing is actually pretty rare so you shouldn’t count on it.

Getting an Auto Loan with Bad Credit

If you don’t have the best credit, there is still the possibility that you can get bad credit auto loans.

It helps to know your credit score before you begin the auto loan shopping process. There may be factors that you aren’t able to address immediately, such as making late payments, but there may be factors that you can fix quickly, such as an error on your report.

If you need auto loans with bad credit, you need to research as much as possible so you aren’t caught off guard when the time comes. Research should include key terms and the APR. When buying a used car, you should also know the Kelley Blue Book value of the car you are interested in.

You can’t limit yourself to just one lender. There are a variety of different lenders that give used car loans for bad credit. Each one wants your business. Even two candidates that have the same credit scores may not be the same for the lender. For example, you may have a better chance then someone with the same score but with no credit history. It’s important to do your research but you don’t want to wait too long. Lenders running a hard credit check will hurt your score. It’s best to visit three different lenders in a 14-day period in order for there to be minimal impact on your score.

Avoid borrowing from subprime lenders. These lenders are going to be a sure bet if you are wondering how you can get a loan with bad credit. Since these lenders cater to customers with low credit scores. It seems like these lenders will make the car buying process stress free and easy. However, these loans come with sky-high interest rates and won’t really do much to improve your credit score.

Many of these loans can also use your vehicle as collateral. If you fail to make payments then you can lose your car. You should only be considering subprime lenders if you aren’t able to find other financing options. It’s best to work on your credit score and save up some cash instead of going through subprime lenders.

You can ask a friend or relative to go with you and consider a co-signer. Even if you don’t want to consider a co-signer, bringing someone you trust to help negotiate can help inspire confidence. Confidence, along with know-how, can also lead to favorable loan terms. If someone does co-sign for you, remember that they will be responsible should you default on your payments. Be sure that you can make payments before taking on a co-signer, otherwise you risk damaging your personal relationship with that individual.

Nonprime buyers can be more likely to see lending contracts with no essential services and goods. Other costs, such as car insurance, can also increase up for nonprime buyers. Don’t allow loans to be contingent on getting any extras, such as after-market services or extended warranties. You also don’t want the loan to be contingent on car insurance, even though you do need it. You are better off for shopping for that separately.

While it may be tougher to get a loan, there are options available for you and you can consider the refinance process later on after credit improves.

Getting a Car Loan with Bad Credit: Money Speed Bump

Should You Refinance Your Used Car Loan?

There can be a number of reasons why it makes sense for you to refinance your auto loan.

Your Credit Has Gotten Better

When you first got your car, maybe your credit wasn’t great. However, consistent and on-time payments improve your credit. So, if you were on-time every time, you may have a better credit score right now, so you can get a lower interest rate. This lowers your monthly payment and saves you money in interest over the life of the loan.

A Dealer Marked Up the Interest Rate

If you got your existing loan at the dealer then the car dealer may have increased the interest rate. So basically, you could have gotten a better deal elsewhere. This happens often when shoppers don’t check their credit score or what rate they qualify for before getting a car. There is a good chance you can undo this damage by refinancing.

You Aren’t Able to Keep Up with Payments

Maybe you bought your car for too much or overestimated your ability to pay off your current loan. You could also be suddenly facing an unexpected financial challenge. By refinancing, you are able to extend the length of the loan, which can lower payments. Don’t take this step too lightly. If you do extend the term of the loan then you pay more in interest. However, it could be better than damaging your credit by not keeping up with payments or facing repossession of your car.

Interest Rates Dropped

Interest rates can fall for a variety of different reasons, including regulatory changes, increased competition in the market, or changing economic climates. If rates are lower now then when you first got your loan, refinancing could help you save on interest and allow you to pay off your loan sooner.

Final Thoughts

Getting used car loans doesn’t have to be a complicated process. There are certain things you need to remember before you get used car loans. But the process can work just like other loans. Auto loan shopping is one of the most important things you can do in order to ensure you are getting a favorable rate and the best terms. There are many different options for where you should go for used car loans and there are even options for those with bad credit. There is also the possibility to refinance in the future.

Getting a Car Loan with Bad Credit: Money Speed Bump

My poor little car is pretty much on its last leg. Sometimes I get in it and it simply will not start. The heat and air recently went out. There are some issues in the wheel well and the brake area. I could go on with this list, but the bottom line is that I try not to drive any farther than I am willing to walk back.

We bought the car used in February of this year, so we have had it less than a year. I have nothing against used cars as a whole- in fact, I have only ever owned used cars- but this particular one had not been cared for at all by the previous owners.

About a week after bringing it home, we knew that it was going to cost more to fix it than replace it. I have known it needs to be replaced, but I honestly hoped it would at least last until tax season. I am thinking that is not going to happen. Now, I am faced with finding a new car with nothing saved and credit that leaves much to be desired. Sound familiar? We are in this together, so let’s figure out how to get a car loan with bad credit.

Basics of an Auto Loan

An auto loan is like every other loan- you borrow money, you get what you need, you repay the loan. Also like every other type of loan, there are pros and cons to it. These should be considered carefully before rushing to get a car loan with bad credit.


  • You have your car almost immediately. Unlike saving to buy your car, you can drive away with the car as soon as the money comes through and paperwork is signed. This could simply be a matter of minutes or hours.
  • Drive now and pay over time. Again, you do not have to wait to purchase. You can be driving the car the entire time you are paying on it. This is always a bonus, especially if it is going to take you a long time to save enough for the purchase.
  • You might be able to afford a nicer vehicle. With an auto loan, you may get approved for more than you could save. This means that you could typically purchase a better vehicle than if you simply paid outright.


  • It is a debt and you are at the mercy of a loan and lender. Without being too dramatic, lenders and debt are a type of prison, in my opinion. The lender may be a very nice prison warden, but you are still a captive of that debt until you pay it off. Debt can affect a lot of your life, including your mental health.
  • You might be tempted to over spend. Since you may get approved for more than you could save, you may be tempted to buy a more expensive car than you can afford. Before even applying for a loan, you need to determine how much you can afford every month. Whatever that amount is should be what you stick with. Otherwise, you are putting unnecessary stress on yourself.
  • You risk losing the vehicle. While you owe the loan, you are at a potential risk of losing that car. If you do not make your payments, they have the right to repossess it. This does not typically happen on the day after you are late. Nobody really wants to repossess your car because that is just something extra for them to deal with. They would much prefer that you just pay the loan, so you probably will not lose the car right after missing one payment. However, this is the lender’s business. If you do not pay, they are losing money, so they will not let you go forever without payment. If you continue to be late on your payments and have a delinquent amount, you just might find yourself without a car on top of losing any money you have put into it.
  • It may require additional insurance. Most lenders require you to carry full coverage insurance while you owe the loan. This is to make sure that their investment is protected. Closer to the end of the loan, they may drop this requirement, but expect it for the majority of your loan term. The cost of this insurance should be factored in to how much you can afford to pay each month.

Car Loan with Bad Credit: Is It Possible?

It is most certainly possible to get a car loan with bad credit. The issues tend to come in with the loan rates and terms. It will also limit where you get financing.

How to Shop for a Car Loan with Bad Credit

When you know how to shop for a car loan, you can get a much better deal. While it is most definitely possible to get a car loan with bad credit, you can expect to put in more work than someone with good credit. Not all lenders will provide loans to people with bad credit. Those that do may require high monthly payments or charge ridiculous interest rates, so you really have to look for a good car loan with bad credit.

Auto Loan from Financial Institution vs Dealership Financing

The first thing you should know is that there are two basic types of auto loans. One is financing from the car dealership. The other is financing from a completely separate financial institution. Each will have different credit requirements, terms, and so on. It is not possible to say which one is better without knowing what each is offering, but you should know what to pay attention to. The interest rates should play a large role in your decision.

The Effect of Interest Rates

When you are trying to decide between the two, obviously the price of the car itself matters along with the interest rates. Sometimes interest rates can be so close to one another that you think it will not make much of a difference. That is not true. Let’s say you are buying a $15,000 car. This is what different interest rates would look like:

10%= $1500
12.5%= $1,875
15%= $2,250
17.5%= $2,625
20%= $3,000

These are simplified and fictitious numbers, but hopefully you can see what a big difference interest rates can make. It is incredibly important to shop car loan rates. When you are carrying out your auto loan shopping, choose the loan with the lowest rate possible, even if it is only 1% cheaper than another. Of course, you want to weight this amount against other factors, such as the repayment length, but most often, the lowest interest rate will provide the best option.

Wouldn’t it be great to have a mall where you can shop for loans? Wow…that would be so awesome…what? There is?! You’re right here! Loanry is the place you’ve been waiting for.

How to Get a Car Loan with Bad Credit AND Low Income

Many people wondering how to get a car loan with bad credit are also wondering how to get an auto loan with low income. While this does pose an additional- but very common- problem, you do not have to give up. You will just need some additional planning, saving, searching, and that kind of thing. There are places that will work with you, even with low income. Be prepared to take some time to really search, though, so that you can get a loan with good terms and rates.

Choosing the Right Car Loan with Bad Credit

We already talked a bit about interest rates. That should be a deciding factor in which loan to choose. However, choosing that loan is simply where it starts. You must also consider how the loan will affect you while you are paying on it.

Consider Your Situation and Lifestyle

As a freelancer, my income ebbs and flows. Some months I make excellent money, and some months not so much. Knowing this means that I have to really consider financial decisions I make. I cannot make any of those decisions based off of my great months because those do not happen consistently. Instead, I factor in the bad months and the mid-range ones. I would prefer to know that I can make the payment even at the worst times than to risk it.

What about you? Are there any special considerations you need to make? Do you have the type of job where you only work a certain amount of months out of the year, i.e. seasonal or oil related jobs? Are your finances already stretched so much that they are about to snap? Do you want to take a month off this year to write your novel or take care of your parents? If there is anything like this, you have to factor this into your decisions or you will end up worrying about how to make payments.

Alternatives to a Car Loan with Bad Credit

Obviously, paying cash for a car would be awesome, if it is possible. Pick up extra shifts at your job, pick up a side job, anything you can do to put some cash away. With patience and diligence, you might be able to pay cash for a car cheaper than you think.
You might not be able to afford to pay cash for it, but maybe a family member will pay for a cheap used car up front and allow you to pay them back.

They might also be willing to cosign with you so that you can get a much more favorable interest rate. Though both of these options are still technically a loan, they will be much better than getting a loan with bad credit.

How to Decrease the Amount I Need to Borrow

One of the best moves that you can make if you must get an auto loan is to decrease the amount you have to borrow. The less you borrow, the less interest you owe. It may require some extra work in the beginning, but it can save you a lot of work down the line. Get creative with ways to save, as there is always a way. Here are a few factors to consider as you do:

Consider Used VS New

Many people have an issue with used cars, and to some extent, I can understand it. There are some who simply have too much pride to be seen riding around in a used car, or they just have to have a new one. If that is you and you can afford it, you can get all of the new cars you want.

Many people reading this though are reading for the purpose that they cannot afford it, at least not all at once. If this is you, join the club. Very few people can simply pay for a new car out right. Let’s consider the numbers to prove my point.

In 2018, there was a total of 27 million new auto loans. And as of March 2019, Americans owed $1.16 trillion. Unless all of these people are taking out these loans for fun or simply because they do not feel like paying it all at once, this shows that the majority of us need help buying a car.

Now, let’s consider the difference in new and used. You can find used cars for less than $10,000- much less. In fact, one of the best cars I have every owned was a cute little Toyota Camry that I bought from an elderly couple for $1,200. They had been the only owners of the car and had taken good care of it. The only reason I got rid of it is because I found out we were pregnant with our fourth child, and- as much as I wanted it to- it could not fit the six of us. We upgraded to an SUV that could fit us all.

As far as purchasing from a used dealership, I have done this, too. In fact, the SUV we upgraded to was a 2001 Chevy Suburban that was $8,000. Our payments were $300 per month for two years. We ended up paying for one year, then paid it off the next tax check we got.

While we were paying this, a friend decided to buy a new car. She went to a dealership and signed the paperwork for a $30,000 car. Her payments were nearly $600 per month and she would be paying for five years. That payment is more than we were paying in rent at the time for a pretty nice house. Yikes!

Additionally, we only needed $1,000 down to drive the Suburban off the lot. I do not remember the exact amount, but she had to come up with three or four times that much. Call me cheap, but if I am going to have to come up with thousands for a down payment and pay $600 per month, I would prefer to do so to buy a house, not a car.

One reason people are against used cars is that they are not always in great shape. While used cars may not always be the best solution, they often are much better than you might expect. If you are concerned about a used car, take it to a mechanic during your test drive. They can tell you if anything is wrong. Many used car lots will fix most problems while you are making payments. If they do not, you can always negotiate on the price if there are any problems.

Another idea is to look for a used car through a rental car company like Enterprise. At regular intervals, they replace “old” cars with new ones. Though their idea of old and mine are a bit different. The good thing about these cars is that they have been taken very good care of, so they tend to be a good investment.

Save for a Down Payment

A great way to cut back on your loan or financing amount is to put down the biggest down payment you possibly can. Even if you can only come up with $500, that is $500 you do not need to borrow or pay interest on. If you can put off purchasing your car for a few months or more to allow you to save, this will be a great way to go.

Make Some Quick Extra Cash

If you cannot wait months to purchase your car, you can still put down a nice down payment by making some quick cash. The ways to do so are only as limited as your creativity. But a great ways is through having a yard sale or two. Everyone who knows me or has ever read any of my advice knows that I am a huge advocate of yard sales. This is because I know that they work and they have multiple benefits, the biggest of which is that you get to clear out your house and make some money for doing it.

Take a run through your home. Throw everything in a box that you do not use, do not want or like, have used as much as you think you can, have unnecessary duplicates of, and so on. Then, go through your home again to do the same. Sometimes you do not notice things the first time, but notice them later.

It can often be tempting to think, “No one is going to want this stuff.” But one man’s trash really is another man’s treasure. You never know who is on a tight budget and will be more than happy to pay you $3 for what you consider an old pair of jeans. You never know what single mom will gladly pay you a couple of bucks for pens, scissors, glue, and more to save money on school supplies.

That is another thing I love about yard sales. Not only does my family and my home benefit, but so do others. During some yard sales, I have met some people truly in need that I have been blessed enough to pass things on to for no charge. If this seems counterproductive to making money, you must not understand the laws of sowing and reaping, karma, or whatever you choose to call it. Basically, when you help others, help somehow finds you, so giving is investing in yourself and others.

Be sure to advertise your yard sale, even if it is just on Facebook. Take pictures of some of your items to go with the post. Trust me when I say that some people absolutely live to go to yard sales and markets on the weekends. Price your items fairly so both you and your customer can benefit. Be willing to cut down on your prices, especially if it is getting later in the day.

If you have a lot of clothes, consider a $5 bag sale. This is my favorite thing to do. I always have piles of clothes. Trying to get rid of them one piece at a time almost always means I have to pack most of them back up. Instead, I hand my customers a grocery bag and say, “Fill it up for $5”. They stuff the bag so a lot of clothes are moving out, and I make some money. Try it yourself. You might just come away with a hefty down payment for your car.

Getting a Car Loan with Bad Credit to Build Credit

If you have had to get a car loan with bad credit, you probably wish your credit was better. Though there may not be a lot you can change this time, you can use this experience to make it better in the future. It is absolutely possible to build your credit with a car loan, if you handle things the right way.

The right way basically means that you pay your payments on time. While it may be a struggle, we have some advice for you: budget- my other favorite financial advice. Think about it: how are you going to pay something that you do not know when to pay, how much to pay, or where the money will come from? As much as I wish they did, bills do not just take care of themselves. You actually have to put the work in.

The first thing to do, in my opinion, is to put the payment date in or on something that you cannot ignore. This will differ depending on your preferences. If you are more of a paper and pen person, write “Car Loan Due” on every monthly page of your wall calendar on the correct date. If you are more of a digital person, type it up on your Google calendar and set it to repeat every month.

Next, set aside a day each month to sit down and plan out your bills. You should have the dates all of your monthly bills are due down on something. If you do not, now is the time to do so. Use this to determine how much needs to come out of each check to go to your bills. If you see you will not have enough for any of your bills, including your auto loan, find a way to make some extra cash then- not the day before the bill is due.

If- after all of your planning- for some reason you will be late on your payment, call your creditor. It is much better to speak with them and let them know what is going on than to hide from it. More often than not, they will try to work with you, which means the late payment may not show up on your credit report.

As long as you are making your payments on time, you should see an increase in your credit score. If you have purchased from a used car lot that does not normally report to the credit bureaus, you can still often use your receipts or some type of statement from them and report it to the credit bureaus yourself. It takes a little more time and effort on your part, but it is well worth it.

How to Establish Credit History When You Have No Credit History?


When you decide that it is time for a new car, try not to jump too fast into a situation. That is when mistakes tend to happen. All financial decisions, including getting an auto loan, should be carefully considered prior to signing on the dotted line. When shopping, simplify your work by using a platform that brings lenders to you. This will help you compare them more easily, and probably discover some you did not even know existed.

The Car Loan Process that Moves Fast

A record seven million Americans are at least three months behind on their auto loan payments. While Americans have been borrowing to buy cars for decades, auto debt has increased considerably since the financial crisis. A good number of consumers find it challenging to make their loan payments on time as a result of going for the wrong loan product. This is why it is necessary to get to know the car laon process. And compare the different options available before taking out a loan. In the end, you will be sure that the loan you go for is right for your needs.

Buying a car makes for a huge investment. Whether you are planning to buy a brand new or used vehicle, it is important to do due diligence before making the purchase. If you are contemplating financing options, you will need to understand the car loan process. This means familiarizing yourself with issues such as interest, prepayment penalties, other charges as well as the consequences of defaulting on these loans. It is also important to educate yourself on ways of ensuring the loan process moves fast. Below is part of the information you need to know about how to get an auto loan.

What Is a Car Loan?

Purchasing a car is a big and important financial decision, making it important to plan ahead. One of the factors you will have to think about is how you will finance the purchase. Considering the high price tags with which cars come today, a significant number of prospective car owners turn to vehicle finance. However, before entering any financial commitment, it is essential that consumers understand what these loans are and how they can affect their financial health.

Simply put, a car loan is a type of personal loan whose proceeds are used to purchase an automobile. In other words, a lender gives the borrower the money they need to purchase a vehicle. The borrower, in return, agrees to repay the loan amount plus accrued interests in equal monthly installments until such a time that the amount owed is paid off in full. While most personal loans are usually unsecured and are issued on the basis of the borrower’s trustworthiness, car loans are a bit different. These loans are almost always secured, with the vehicle to be bought serving as collateral. This means that the lender can repossess and sell the vehicle to pay off the loan debt in the event that the borrower fails to make their payments.

There is a lot that you need to know about the car loan process when considering it as an option to finance your vehicle purchase. This information will go a long way in helping you compare different lenders based on their terms. In the end, shopping for auto loans will help you make the best choice.

Ways to Increase Your Chances of Getting Approved

After preparing to apply for vehicle finance, it can be very frustrating if your application is rejected. Similarly, the excitement that comes with the prospect of owning a car means that you will want to see the car loan process moving fast. Below are some of the ways to increase your chances of getting approved for a car loan.

Borrow What You Will Afford to Pay

Generally, lenders are likely to offer you the amount you need if they establish that you will be in a position to afford to repay. Taking out an amount that you will pay back comfortably will also help you maintain your financial health. It is important to consider your income level, debt-to-income ratio, and the monthly repayments.

Raise Your Income

With the important role that income plays in determining whether you qualify for a loan, you should consider working on ways to increase your income. These include doing a second part-time job, engaging in a freelance business, or getting a side hustle. This will go a long way in ensuring that you can afford the loan you want to apply for.

Put Up Collateral

One of the common reasons why lenders will decline your application is because they see you as a risky borrower. Putting up some form of collateral as security for the loan will offer security for the loan. Since almost every car loan process uses the vehicle as collateral, you should find out if you can include another asset in order to get approved.

Make a Down Payment

You can also consider exploring the option of making a down payment. A down payment will reduce the amount of money you borrow, a factor that will ensure you repay the loan without additional pressure on your wallet.

Request a Meeting with the Loan Officer

A face-to-face meeting with the loan officer will give you a chance to show important personal information that is not captured in your credit report. Knowing how the car loan process works will also help increase your chances of getting approved. It is essential to apply for loans that you know you qualify for.

Paperwork to Bring With You

Bringing accurate and complete documentation to your meeting with the loan officer will help to make the car loan process fast. While your credit score will show your repayment of credit card debt and other loans, it does not include your bills, monthly mortgage or rent or payment of private loans. You will need to prove that you have a source of regular income on a regular time cycle. This is why you should carry with you paychecks from all the jobs you maintain.

Evidence of your other income streams will demonstrate your ability to repay the loan in the unfortunate event that your employer reduces your hours or terminates your employment. You should remember to carry statements from your checking account, stocks and bonds, certificate of deposits, savings account, and retirement fund. In case you receive supplementary income such as alimony, veteran’s benefits, or child support, you should include documentation to show that.

The best way to know how to get an auto loan is to do your research. The information you gather in this way will make it easy for you to know what to expect and how to prepare for the process. You will also understand the different documents that are required by your lender of choice. Today, there are numerous lenders in the market, each offering different interest rates on their auto loans. When you are shopping car loan rates, you can work with a third-party that is not in the loan business. We make it easy for you to find a lender that will help you meet your financial needs.

Advantages of Auto Loans

A car loan, just like any other lending product, can have a positive impact on your life if managed well. However, mishandling can result in financial and emotional stress. This is why it is important to not only understand the car loan process but also know the pros and cons of these loans. Here are some of the advantages of car loans.


One of the advantages of auto loans is that they offer consumers flexibility; allowing you to buy a vehicle now and pay for it over a period of time. This is important for buyers who cannot pay for the car upfront but will afford to repay a loan in monthly installments.

Future Savings

Financing a new car helps you avoid the problems associated with purchasing a used car just to avoid having to take out a loan. A new car is likely to offer better fuel efficiency and fewer repairs, helping you not only save money but also enjoy peace of mind.

No Collateral Needed

Generally, you will not need collateral to get a car loan. In most cases, the car you want to buy will serve as the collateral for the loan. In case you fail to pay the outstanding balance, the lender can seize the car and sell it to repay the loan.

Improved Budgeting

Depending on the agreement you reach with the lender, you will have a chance to decide how much you will be paying every month. This ensures that you do not overspend or have to make adjustments in other areas of your life.

Build Your Credit Profile

A car loan, just like other types of loans, gives you an opportunity to improve your credit score. However, you must ensure that you make all the payments on time. In order to do this comfortably, you need to shop car loan rates to find a loan that you will afford.

Disadvantages of Auto Loans

There are a number of short-term and long-term problems that vehicle financing can pose. It is necessary to know about these problems and identify ways of avoiding them.

Paying Interest

A car loan will require you to pay interest on top of the principal amount you borrowed. Although your interest will depend on several factors, it will push up the total cost of the car. In case you have poor credit, you will end up paying even more in total cost, a factor that could have an impact on your budget.

Financial Implications

When it comes to car financing, there is always the temptation to bite off more than you can chew. Once you are at the dealer’s showroom, you can be tempted to buy a car that is more expensive than what you can afford. While you can make a few adjustments to your budget, this may hurt your long-term financial outlook.

Insurance Considerations

Most of the people who finance a car go for relatively high-value vehicles. This means that auto insurance premiums are bound to be higher. The lender may also require that you carry higher liability and physical damage coverage to ensure the vehicle and their interests are protected.

Possible Repossession

A simple understanding of the car loan process will reveal that the lender will have the right to repossess the vehicle if you default on payments. This will not only force you to find a new way of moving around but will also have a negative impact on your credit history, making it more difficult for you to access funding for a considerable number of years.

Factors to Consider before Taking Out a Car Loan

It is normal to be excited at the prospect of buying a new car, especially if you are about to buy your first car. However, it is important to keep a level head to ensure that you make sound decisions. Beyond being familiar with the car loan process, here are a few things you should keep in mind before taking out a car loan.

Car Loan Rate

This is a critical aspect to consider since the interest rate will affect the amount of the loan as well as your monthly repayments. Make sure you do your research and read the fine print before committing to a contract.

Credit Score

Most lenders will look at your credit score to determine your risk profile. While a high score can help you enjoy lower interest rates, a low score might get you rejected. It is important to work on improving your credit score if you are to increase your chances of being approved for a loan.

Fees and Charges

Apart from the interest, there are other fees and charges that affect the cost of borrowing. You should find out about fees such as discharge fees, establishment fees, and late payment fees. Since these fees vary from lender to lender, you should do due diligence before taking out a car loan.

Loan Term

As a borrower, you have the capacity to choose how long you want to repay the car loan. However, you should remember that a longer loan term will see you paying more in interest despite offering cheaper monthly repayments. This applies to any car loan process.

Car Loan Repayments

Another critical factor to consider is the amount you will be expected to pay back every month. This will help you determine whether you will be able to afford the loan. You will need to input the value of the vehicle, loan term, interest rate, deposit, and balloon payment in a car loan calculator to arrive at this figure.

Balloon Payment

A balloon payment is a lump sum that is paid to the financial lender at the end of the loan term. This ensures that the monthly repayments are lower, helping to make the loan affordable during that period. However, you will have to pay the loan in full once the loan term ends.

What to Know When Financing a Car

When you apply for a car loan, you will be getting the car itself and the loan for the new vehicle. The key to ensuring that your experience is rewarding is knowledge. As such, you should know all the important issues about the car loan process.

Determine Your Budget

The first step would be to create a budget. Once you know the type of car you want and how much it costs, you will be in a position to determine the loan amount you need. This will go a long way in helping you plan properly for your needs and the monthly repayments.

Choose Between Used and New

Although this may seem like a no-brainer, it is one of the most commonly overlooked issues. The choice you make will have a huge impact on the purchase price, repair costs, the cost of maintenance, depreciation, and the condition of the vehicle.

You Can Negotiate a Lower Interest Rate

What most people do not know about the car loan process is that borrowers can negotiate for a lower interest rate. A good number of dealers who offer in-house financing will be willing to offer you a lower rate depending on your credit score and down payment. Negotiating a lower interest rate will help you save a significant amount of money.

There Are Other Ways to Pay for a Car

Apart from car loans, there are other ways to pay for the car you want. Even as youare shopping for auto loans, you should take time to consider other options. Using your savings, borrowing from a credit union, or borrowing from family are some of them.

Direct Lending Versus Dealership Financing

There are two options available to lenders seeking vehicle financing. While direct lending involves getting a loan directly from the bank, dealership financing entails getting a loan through the dealership.

Car Loan with Bad Credit

During the car loan process, a borrowers’ credit score will have an impact on how much they qualify for as well as the interest rates they pay on the loan. As such, you should work on improving your credit score before taking out a car loan. However, if you have poor credit but do not have time to improve it, you can apply for car loan with bad credit. The good news is that there are several steps that you can take to ensure you get a car loan with bad credit.

Look Over the Credit Report

There is a chance that your low credit score is as a result of errors and oversights in your credit report. Before applying for loans for people with bad credit, you should look over the report to establish whether there are any errors. In case of errors, you should get them rectified to increase the loan opportunities you can enjoy.

Get a Co-signer

If you have poor credit, you can consider getting a co-signer. This should be someone with a better credit score than you. The co-signer will repay the loan in case you default. Lenders see this as security for the loan. So it’s a factor that can help you get a car loan faster.

Look at the Overall Loan Terms

Rather than simply focusing on the monthly payments you will be required to make, borrowers should look at the loan terms in their entirety. The loan term and interest rates will also have a significant effect on your finances.

Do Your Research

Today, there are lenders who offer bad credit loans to people who cannot be approved by traditional lenders. A little research will help you find lenders who can assist when you have poor credit. However, just with other types of loans, you should look into different rates to ensure you get a favorable deal. Make sure you are connecting only with reputable lenders.

Dealing with Future Car Issues

Beyond knowing how to get an auto loan, you should also be aware of the car issues you are likely to deal with in the future. Whether you buy a new or used car, there are several expenses that come with ownership. In order to be safe, you should take the necessary steps to minimize car trouble and reduce the impact it has on your life and finances.

Regular Maintenance

If you are a first-time car owner, it is important to familiarize yourself with the various maintenance issues you will have to deal with from time to time. Ignoring basic and regular maintenance can cause a lot of trouble, leading to inconveniences and higher expenses. It is advisable to have an emergency fund. This will allow you to take care of any unexpected issues that may come up.

Maintain Insurance

Most of the lenders who offer car loans will require that you purchase the types of insurance coverage that will protect their interest in case of damage to the vehicle. You will also need to buy insurance that covers some of your car issues. Since you will have to make sure that your insurance is paid and up to date, you should shop around for the best rates before choosing an insurance provider.

Carry a Few Essentials

Once you have bought your car, there are a few essentials that you will need to be carrying with you. Some of the most important items include a spare tire and a portable battery charger.

Final Thoughts

Even as you think of ways to ensure a successful car loan process, you should be ready for the challenges associated with car ownership. In case you really needed the car, there is a good chance you will get value for your money.

One of the important things to do before applying for a loan to purchase a vehicle is to learn about the car loan process. However, once you have gone through it, obtained the money you need, and purchased your car, you should remember to make all loan payments on time. You can do this by setting up auto-pay, putting it on your calendar. Or controlling spending, and going for debt consolidation if you have trouble making the monthly payments consistently. We make it easy for consumers to find a lender. This helps to save you time and offer you the convenience you need. The next time you are looking for a car loan, kindly consider working with us for a hassle-free borrowing experience.