Some people think auto loans are only for reasonable or well-off individuals, but this isn’t necessarily the case. Most car buyers are approved for an auto loan with little to no problems.
Approval for an auto loan can be tricky, especially if you have poor credit. If you still want to own a car, here are some tips on steps you can take to help you get approved for an auto loan.
Determine Your Credit Score
Credit score reports can help you spot identity theft and other problems before you get a loan, so check your score often. The government gives you one free credit report a year, so use it to ensure that your identity is secure and that the information on your report is accurate. You can also download and use apps or websites to check your credit; these are usually free, but some allow you to subscribe for more detailed monitoring.
Compare Lenders to Find the Best One for You.
Getting a loan with a low credit score may be easier than you think. Major banks often reject small loans to people with poor credit scores, but some lenders are more likely than others to approve loans for borrowers who are trying to rebuild their credit. To find a lender that will work with you, ask for recommendations or read reviews online.
Review Your Debt-To-Income Ratio
Banks want to approve loans to people who will repay them, but it’s difficult for them to assess your ability to repay if you have a high debt-to-income ratio. A high debt-to-income ratio can make you ineligible for a loan, regardless of your credit score. If more than 40% of your monthly income is used to pay down debt, you may need to improve your financial situation before applying for a loan.
And finally, getting rid of any existing debt and finding a cosigner can help ensure approval for your loan.
The loan process can be intimidating, but it doesn’t have to be. Make sure you read your contract carefully and ensure the interest rate you are getting is fair. Remember to get everything in writing!
