Are you ready to buy a car? Whether you’re thinking about getting a sports car for yourself or a van for the family, you’ll probably need to get a loan to pay for some of the cost. In fact, about 43% of all adults in the U.S. have an auto loan. Many prefer to get a used car, since you can save some money compared to buying a brand new car.
Before you head out to look at cars, here’s what you need to do make sure you get a car loan that’s right for you:
Find out your credit score before you apply for a loan
A big factor in the type of loan you can get and how much you’ll pay in interest depends on your credit score. That’s why it makes sense to see your credit report as soon as you can.
Did you know you can get a free copy of your credit report once a year from the three big credit reporting agencies by going to www.annualcreditreport.com? You can check your credit report for mistakes and ask for them to be corrected since errors can lower your credit score.
Figure out how much of a loan you can really afford
Some people focus only on how much they can afford to pay each month for a loan. However, you also need to think about insurance, registration fees, repairs, and gas. It’s a good idea to fill out a budget worksheet to figure out what’s a realistic auto loan payment for you.
Get your paperwork together
Before applying for a loan, you should gather the right paperwork so you can get approved faster. A lender, such as a credit union, wants to see if you can pay back the car loan and that you’re a good risk. Here’s a checklist of items you’ll have to show a lender:
Proof of your income. Bring recent paycheck stubs showing how much you’ve made so far this year. If you’re self-employed, you can show your latest tax returns for proof of your income. If you have other income, such as a rental, alimony, or a legal settlement, have paperwork showing these sources.
- Information about the vehicle. Bring a buyer’s order or a dealer sheet if you’re getting a new car. Or, if you’re buying a used car, have information such as the vehicle identification number (VIN), year, make, mileage, purchase price, and the title.
- Proof of residence. Have documentation showing where you live, such as a mortgage statement or a utility bill.
- Your credit and financial info. This includes records of payments you’ve made, such as credit card statements, mortgage or rental agreements, or child support. If you have other loans or debts, the lender may need to know about them.
- Proof of auto insurance. You need to show that you have the required coverage with an insurer for the car.
By following these tips, you’ll be in the driver’s seat of your new car in no time.
Rates, terms, and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.