How to Qualify for a Car Loan

March 18, 2013

If you need a new car but cannot afford to pay cash, you need to know how to qualify for a car loan. It isn't as hard as you may imagine—car dealerships and lenders are more than willing to work with you, no matter if your credit is good, bad or nonexistent. It's the dealer's job to sell as many cars as they can, but qualifying for a loan with a low interest rate can be tricky unless you have your finances in order.

  • Start paying your bills on time. After you've begun doing this, you should wait at least six months before you attempt to get a car loan. This waiting period will allow your credit history to reflect that you've remained current with all of your payments.
  • Along with paying your bills on time, you should take a look at your credit reports and correct any errors that you spot. It can take some time (up to a few months) for your credit history to show that the false item has been removed, so you should also begin this process well ahead of time.
  • Compare and contrast. Most car makers are constantly advertising special rebates and other offers, which lower the total price of the vehicle (and the loan amount). The lower the amount to be financed, the more likely you are to be approved even with no credit. Now is a good time to compare prices on your favorite car at a few dealerships, too. Sometimes, traveling farther will get you a better price.
  • Determine how much it will cost for the car you want. Knowing how much you can spend will allow you to get the loan that suits your needs. Cars Direct has a useful loan calculator, as do many other sites. You can submit your information one time, and get loan quotes from a variety of lenders. From there, it's easy to apply—and in many cases, you can be approved in just minutes.
  • Consider increasing the size of your down payment. If you are offered a cash-back incentive by the dealer, you should take this amount and apply it toward your deposit (alternatively, you can use this money to augment your trade-in value). Either way, you are reducing the amount you'll have to finance, which will result in lower monthly loan payments and lower interest. That's money in your pocket!
  • Keep a stable job. Lenders like to see applicants that have a minimum of one year on the same job. Employment stability makes a person seem like less of a risk—if a person has a guaranteed source of income, they are much less likely to default on a loan.

Buying a new car is one of the biggest investments you'll ever make, and a car loan isn't something that you should enter into lightly. By knowing how to get qualified for a loan, you'll have an easier time with the application process-and you're much more likely to get approved. There are lenders waiting to help you get into the car you need, and there's no time like now to apply.

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