Very few people pay for their car with cash. Nearly everyone gets auto loans in Baltimore. That means figuring out what you can be approved for is a very important aspect to car shopping. Sure, you may love a certain vehicle but if you can’t get qualified to buy it, you’re wasting your time trying to pick out your favorite color.
In order to qualify for a car loan, there are a few different factors you need to understand. While having good credit will help what you’re approved for, there are other criteria that lenders consider when determining whether to approve your application. Don’t be discouraged if you know your credit isn’t great. Here’s what you need to know:
Step #1 Work on your credit. Having a good credit score is the first step if you want to get approved for an auto loan with a low interest rate. In general, a good FICO Score ranges from 670 to 739. Check your credit report as soon as you start thinking about buying a new car, even if it’s months in advance. Identify items that are hurting your credit score then clean up your credit by paying off past-due accounts, disputing any errors, and adding positive information like bills paid on time.
Step #2 Look into bad credit car loans. If you don’t have good credit, you aren’t totally out of luck. What you’re looking for is a bad credit car dealership that specializes in giving car loans to drivers like you. By visiting this type of dealership, you’ll be able to get a used car you are happy with. As you make your payments on time every month, your credit will naturally improve.
Step #3 Save up for a bigger down payment. The more you pay up front, the smaller the loan needs to be. Your credit history will limit the size of car loan you can get, and a high interest rate will make the amount even lower. A down payment can offset the interest, taxes, and fees and widen the selection of vehicles you can choose from. If you save up for a few months, you may be able to put $1,000 down on a $5,000 car, which is a lot easier to be approved for than a $5,000 loan.
Step #4 Prove your source of income. Having a steady income is important to auto lenders because it improves the likelihood that you’ll make your monthly payments, no matter what your credit is. You will need to provide your income with one or more forms of documentation. If you’re a W-2 employee, for instance, a recent pay stub will suffice. If you’re self-employed or receive another form of income, you may need to provide bank statements. Be sure to bring these along when you’re car shopping.
Having good credit certainly makes car shopping easier, but bad credit doesn’t make it impossible. Take your time and plan a few months in advance. When you walk into the dealership, you’ll get a deal you’re happy with.