Applying For A Car Loan

From a literal perspective, applying for a car loan is as simple as completing an application and then submitting it to a lender. But if you want to get approved, you would be well served if you took the time to understand how to get a car loan – especially if you have poor credit – prior to applying. Here are a few things to keep in mind:

Assess your personal situation

When applying for an auto loan, it is important to understand what FICO score auto lenders require. This will vary depending on the auto finance company but generally speaking, people fall into one of four credit categories:

Each of these four categories is served by different types of auto lenders and as such, each of them may require different loan documentation in order to finalize an approval.

• Good credit which consists of a FICO score range of approximately 680 and above
• Fair credit which consists of FICO scores between 620 and 680
• Sub-prime credit which consists of FICO scores between 525 and 620
• Buy here pay here credit which is usually FICO scores beneath 525

For example, if you have good credit, applying for a car loan is easy and typically will not require any loan stipulations in order to get approved. If on the other hand you have really bad credit, you may need to come up with additional documents such as proof of income, proof of insurance, a utility bill in your name, a valid phone number registered in your name and a valid drivers license to name a few.

Know your options

Before you apply, make sure to research your options. If you’re in the market for a new car, the best financing available is offered by captive auto finance companies such as General Motors Acceptance Corporation or Ford Motor Credit with zero percent financing. Keep in mind however, these companies will require applicants to have good credit in order to qualify.

If you have bad credit, your best resource for an auto loan might be from a local car dealer that has a dedicated person or department set up to assist those that have credit problems or, if your credit isn’t too bad, you could try going online to find an auto finance company that offers direct car loans for people with credit challenges.

Be prepared before you pull the trigger

Lastly, be prepared to answer any questions a lender may have in regards to all derogatory accounts that appear on your credit report. In addition, if you have problem credit, make sure you have at least a 10% down payment – more if possible – before applying for a car loan.