How to Apply for a Car Loan

how to apply for a car loan: Here's what you need to know before applying  for a car loan - The Economic Times

Cars can be impossibly expensive, yet many of us need one to live a normal day to day life. Whether it is a long commute to work, a very full family that needs to get to school, soccer practice, and art club all at the same time, or having to drive across the state to see others for a holiday, cars are an essential part of modern life that can be extremely difficult to go without.

If you are in a situation where you need to get your hands on a car but do not have the cash to afford one, you are not alone, and here is where a car loan might come in handy.

Read on to find out how you can apply for a car loan.

Check Your Credit Rating

First and foremost, it is important to check your credit report to find out where you stand with borrowing money. You are able to complete ‘soft searches’, which will not affect your credit rating, and the details of the search will show you how much money you will be able to borrow when looking to purchase a car and what the interest rate will be. You can also request a copy of your credit report for free annually.

It is not smart to apply for new car loans or auto repair loans without first being aware of your credit rating, as any negative information could lead to a higher interest rate.

Check Out Multiple Lenders

As tempting as it can be to go for the first offer you see, it is much more worthwhile shopping around to see if you can find a better deal – after all, this is a loan you will be paying off, and interest can add up.

There are a few areas you can check to find the best rates, some of which include:

  • Large national banks
  • Dealership financing options
  • Credit unions
  • Businesses specifically dedicated to auto loans

See What Your Pre-Approved Options Are

Once you put in a request for an offer for your chosen loans, you will start to see your pre-approved offers with their interest rates. This is where you can start making the best decision for you. However, it is worth noting that each different lender uses the information in your credit report differently, which means you can be given widely different offers.

There are two different sets of information you might be given when you receive your offers, including pre-qualified and pre-approved. You must know the difference so you can make the best choice for yourself. 

Pre-qualified means you will most likely receive a quote that is estimated around the total given – but it might not be the exact one.

Pre-approval is essentially the ‘next step up’, which means that the offer you are presented with will more than likely be closer to the actual one you will be able to claim. 

Do not forget to negotiate if you have been pre-approved!