Need a Car Loan? 5 Tips for Getting Started Online

Get Car Financing
Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - April 6, 2021

There are plenty of things you can do to prepare for your next auto loan, and many of them can be done online from just about anywhere. Here are five tips on preparing for a car loan before stepping foot into a dealership.

Check Your Credit

One of the first things you can do to begin preparing for an auto loan is to know where your credit stands. Car loans can vary greatly, and the type of loan you qualify for can depend on your individual credit situation. Most auto lenders use the FICO credit-scoring model when they're evaluating your auto loan eligibility. This model ranges from 300 to 850, and the higher your credit score, the more likely you are to qualify for a car loan with all lenders.

Typically, borrowers with a credit score around 660 or lower are considered "bad credit" borrowers. This doesn't mean you're out of luck when it comes to financing, though. There are lenders available through special financing dealerships that help people in poor credit situations.

To find out where your credit score stands, and what’s on your credit reports, you can visit www.annualcreditreport.com to get a free copy of your credit reports from each of the three major U.S. credit bureaus: TransUnion, Experian, and Equifax. This service has traditionally only allowed consumers to view a copy of each of their credit reports once every 12 months. However, due to the global pandemic, this government resource is now allowing you to access your credit information once a week – and it's completely free. For now, this service is slated to be available until April 2022.

You can also stay up to date with your credit score and reports by signing up for a credit monitoring service.

Research Interest Rates Online

Since car loans are so individual, you're not going to be able to go online and get an exact interest rate from a lender without actually applying for a loan. However, you can find the average interest rates for people with credit scores similar to yours. There are a few different ways you can go about this:

  • Research averages in your state or across the U.S. online.
  • Check out an online auto loan estimator, which can give you an average estimate of interest rates you may qualify for given your situation.
  • Look for annual reports that can tell you the most recent trends in auto financing.
  • Check out the most recent interest rate averages by credit score (our numbers are updated each quarter).
  • Find out what the current prime rate is. This is the base interest rate that banks charge each other, and it determines the baseline for interest rates in the U.S.

CDC Tip: Don't forget that lower credit scores often mean qualifying for a higher-than-average interest rate. The rate you're charged is likely to be influenced by your credit score, where you live, and the lender you're working with. Though interest rates do vary, the average rate for bad credit borrowers in our network is around 13.6% on average. The higher your interest rate, the more you pay to finance a vehicle.

Build Your Budget

Building your budget is key to getting an auto loan that you can comfortably afford to complete. When you're looking for a car loan, especially if you have poor credit, you have to meet a lender's minimum income requirements, as well as debt to income (DTI) and payment to income (PTI) ratios.

You can use an online car loan estimator to find out what you may be able to qualify for based on the input you enter. Or, you can calculate your DTI and PTI to see how much of your income is available and how much you should aim for in a monthly payment amount.

Your PTI estimates how much you may be able to afford for your monthly car loan and insurance payments combined. Lenders generally prefer not to finance people with a monthly payment that's more than 15% to 20% of their income, but the lower the better. To calculate your PTI simply multiply your gross monthly income by 0.20. You should aim to keep your car loan payments below this amount.

DTI compares your expenses to your pre-tax income. To find yours, simply add together all your monthly loan payments, credit card payments, and other bills such as insurance and your estimated monthly car loan payment (not including incidentals like groceries and utilities). Then, divide that total by your gross monthly income.

The number you get, when converted to a percentage, represents how much of your income is likely to be taken up once you take on the car loan. Lenders typically don't approve auto loans for people with a DTI of over 45% or 50%. Once your budget gets that tight, lenders may not feel it's worth the risk to overextend your finances.

Believe it or not, they want to see you successfully complete your loan, too.

Research Vehicles

When you're a bad credit borrower, you can't always pick out your car then get financing. This means going through the bad credit lending process first, getting an approval, then picking out a vehicle from dealer stock that fits within the loan parameters that you're given. This doesn't mean you shouldn't know what you're looking for, though!

Make sure you know what is available, and what meets your needs as a driver. Keep in mind that getting an affordable used car is often a little easier than financing a brand new vehicle if your credit isn't stellar.

A good way to go about finding cars that might be good for you is to make a list of things you have to have in a vehicle, and things you can live without. Be realistic about why you need one and conscious of what you do on a regular basis. If you absolutely need third-row seating for carpools but also have to commute long distances, research fuel-efficient vehicles with the space you need instead of just looking for the roomiest car on the market.

If you want to shop for what's on the market right now, you can check out our new and used deals pages here.

Find a Dealership

Once you've done your research online, built your budget, and have a good handle on what you need, it's time to start the search for your loan. When you have bad credit it isn't always easy to qualify for preapproval through a direct lender. Not to worry, though, because here at CarsDirect, we've cultivated a coast-to-coast network of special finance dealers that have lenders to work with unique credit situations.

Whether you're facing a low credit score due to unforeseen circumstances, or you're just new to the world of credit, we want to make the search for a car loan easier using our online services. Simply fill out our fast, free, auto loan request form and we'll get to work matching you with a local dealership.

Need a Car Loan?

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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