3 Things To Know Before Applying For That Auto Loan

23 July 18

Before Applying For Auto Loan

Loan Qualifications

How much of a loan you can get for a vehicle depends on an array of factors. However, before asking for a loan, you need to check on three key things:

Attain Credit Reports and Scores

It’s important to know how your credit is before applying for credit. This means knowing what your credit report says and the score you have. While you can get a free credit report from each credit bureau – there are three – once a year. Be sure the information in the report is correct and dispute any potential notations that are not correct.

The majority of lenders will use the FICO scoring model when running your credit. While you can get your FICO score, it may cost you a small amount of money to do so.

You Should Meet Income Requirements

If you’re going to qualify for a loan of any type, you need to show the lender that you can repay that loan. This means showing them you are employed and/or have income. Subprime lenders demand that you make a monthly income of up to $2,000 before taxes from one income.

If you have more than one source of income, the lender looks at the highest amount for the qualification. Lenders also want to see a borrower be at their present job at least six months and have three years’ worth of working history.

Know Your Budget and Put Down A Down Payment

After you’ve learned what your credit is like and if you can meet the general requirements, you need to do a little budgeting. Consider using online tools to determine what your affordable monthly payment can be and the kind of car you can afford.

If you’re getting a subprime loan, you should also have at least $1,000 to put down on the vehicle. Some lenders demand that you put down 10 percent of the vehicle’s selling price. The higher the down payment, the less money you pay for each month and on interest.

Do You Need Perfect Credit For A Vehicle Loan?

There’s no reason to need perfect credit, but you should make sure to have good credit. If you don’t, some dealers will work with subprime borrowers to help them get a vehicle they need and want. Just remember to buy only a vehicle that you can affordably payback.