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How to Get Approved for a Car Loan

Last updated 05/15/2024 by

Allison Martin
Your car is on its last legs and it’s time to find a replacement. Since you don’t have a ton of cash sitting in a bank account, you’ll need to apply for an auto loan.
Auto loans outstanding in USA (Source)
You’re not alone. In fact, 33% of Americans used some form of financing to purchase a vehicle in 2015, according to So, it’s no surprise that, “auto loans are the third largest form of debt in the United States, behind housing debt and student loan debt, with over $1 trillion of auto loans outstanding in the third quarter of 2015.”
But what if you’ve never applied for an auto loan or have less than perfect credit?
The good news is you don’t have to settle for a clunker. However, you’ll have to do a little legwork to get a competitive car loan. Otherwise, you may be rejected or spend a fortune on interest. Here are a few tips to get you started:

Get Competing Auto Loan Offers In Minutes

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Check your credit

Your income isn’t the only factor lenders consider. Your credit score is also important.
Having a low credit score doesn’t mean your loan application will be denied. But you may only qualify for a loan with an outrageous interest rate, which could cost you hundreds, if not thousands, more in interest over the life of the loan. To illustrate:
Loan AmountLoan TermMonthly PaymentInterest RateTotal Interest Paid
$15,0004 years$3394%$1,257
$15,0004 years$3739%$2,917
$15,0004 years$39512%$3,960
Visit CreditKarma or Credit Sesame to view your credit score for free. Depending on what that three digit score is, it may be best to hold off and build it up before applying.
The only way to know if you qualify for the best rates is by calling the lender.
The minimum score might be 680 for one lender and 640 for another lender [so] you need to approach borrowing in the same way that lenders understand it — as an individual consumer.
*Quick note: lenders often use a variation of the FICO model to evaluate auto loans.

Shop around for loan providers

It’s never a good idea to go with the first loan offer you receive without exploring what else is out there. Use SuperMoney’s auto loan comparison tool to get started. You can also reach out to local banks and credit unions. If you’re planning to buy used, confirm that the lender offers financing on the year, make and model of the vehicle you have in mind. If you’re considering an older model, you may have a hard time finding a lender. However, some lenders will finance vehicles that are up to 10 years old, so it’s worth asking.

Get loan qualification criteria

Once you’ve narrowed down your list of lenders, ask them about loan criteria. While loan decisions are made on a case by case basis, most lenders have minimum benchmarks that must be met. These could include a minimum down payment, credit score or bi-weekly income. Also, look for lenders who specialize in helping those with minimal or poor credit (if necessary).
Plus, you’ll know if you even have a chance at qualifying or if you need to cross them off your list and look elsewhere.
Quick note: avoid subprime lenders who offer double-digit interest rates..

Get pre-approved

Until you’ve selected a vehicle, you’ll receive a loan pre-approval. In most instances, a loan pre-approval is valid for up to 60 days from the date of issuance. Even better, you have 30 days to shop around for the best rate without receiving multiple inquiries on your credit report. As long as you select a loan before the 30-day window is up, your credit report will only show one inquiry.

Convert your loan pre-approval to an auto loan

Present your pre-approval document to the financing department if you buy from the dealership. (You may want to wait until the negotiations are complete to ensure you get the best deal). They’ll get in touch with the lender to finalize the loan documents.
But chances are they’ll also want to see if they have something better. (It won’t hurt to take them up on their offer if you’re still in the “rate shopping” window).
On the other hand, you’ll have to contact the loan provider to execute the final documents if you’re purchasing a vehicle from a private seller.

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Allison Martin

Allison Martin is an accomplished finance writer who has written for publications including The Wall Street Journal, MoneyTalksNews, The Simple Dollar, and Her work has been featured on Fox Business, Yahoo! Finance, MSN Money, and ABC News. She enjoys writing about personal development, entrepreneurship, personal finance and is a Certified Financial Education Instructor (CFEI).

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