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Just as with any loan a successful car loan application depends largely on the three C’s
• Credit: Potential applicants must be able to demonstrate a history of responsible fiscal management. This is illustrated by a history of paying bills in a timely manner, limiting debt and following a saving and spending plan. It’s a good idea to get a copy of your credit report before you apply for a car loan. You’ll have a better idea of where you stand and what sort of terms you should expect. Those with significant credit blemishes may want to consider postponing a car loan until the blemishes, as they can be costly in terms of interest rates and terms.
• Capacity: Capacity addresses the question of ability to repay the loan. You must be able to demonstrate that you have sufficient income to repay the loan and meet your current financial obligations. If it appears that you will be overextended with the loan payments you are unlikely to get the loan. Potential lenders will consider income from employment as well as secondary income from sources such as child support and alimony payments.
• Collateral: Lenders are generally more comfortable with highly liquid assets that can be recovered in the event of default. In this instance, your car will serve as collateral. If you default on the loan, or become unable to pay, the lender will repossess the car.
There are a number of ways to complete an application when you are ready to apply for a car loan. You may choose to talk with a representative from your current financial institution who can take your information via phone or in person. You can also choose to complete your application via the Internet. Plan ahead so that you won’t have to fumble for required information, such as gross income amount, account numbers, co-applicant information, if applicable, etc. In most cases you can expect a decision within two business days.
Pre-approval for a car loan is not simply about getting a dollar figure; it is also about smart planning. When you plan ahead, rather than just showing up at the dealership:
• You already know your price range
• You know what cars are available in your price range
• You have considered how your monthly payments and maintenance costs will fit into your budget.
• You understand how much you can expect to spend over the life of the loan.
• You avoid pre-payment penalties imposed with some dealer financing plans.
There are innumerable benefits to obtaining a car loan before you visit the dealer. Not the least of these is the haggling you skip. Pre-approved car loans help you put the ball in your court by allowing you to take charge of your car buying dollars.