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Getting a Loan for a Car: How to Get Approved for a Car Loan

2 March 2020 No Comment

The average car loan is around $30,000 for a new car, but you might be worried that you won’t get approved.

There are a lot of factors that play into whether or not a lender will approve you to get a car. We are here to help make it simple, so you know how likely you are to get the car loan you want.

Continue reading this article to learn how to get approved for a car loan.

How Much Car Can You Afford?

Before you start car shopping, you need to figure out how much car you can afford. You don’t want to go to the car lot without knowing how much car you can afford.

Look at different loan scenarios and see how much the monthly payment would be for each of them. When you find one that will work for you, you can look and see the overall cost of the car. This will just give you a general idea since you might be able to get other loan terms.

Figure Out Your Finance Options

If you are looking for bad credit loans, you might not be able to afford a very expensive car. That doesn’t mean you should settle for a car that isn’t reliable. When you get a loan when you have bad credit, you might have to pay a higher interest rate, but if you need transportation, this could be the best option.

Increase Your Credit Score

Your credit score has a lot to do with whether you’ll get approved for a car loan or not. There are some simple things you can do to increase your credit score, but some of them do require patience.

Decrease Credit Utilization

Credit utilization is the percentage of your credit you’re using. If you’re using a high amount of your credit cards, this doesn’t look good to lenders. It looks like you are maxing out and might not be able to pay your bills.

Try to lower your credit utilization to below 30% or even lower for the best results.

Pay Payments on Time

Paying your payments on time is key to showing potential lenders that you are safe. Even being 30 days late with your payment can cause trouble with your credit score.

Have a Good Mix of Credit Types

Having auto loans, home loans, credit loans, and other types of credit will help lenders see how you do with different types of credit.

Have a Low Debt to Income Ratio

Having a low debt to income ratio means you have a low amount of money going out vs. the amount of money you have coming in each month. This lets lenders know you have money to pay back the loan.

How to Get Approved for a Car Loan — Now You Know

Now you know how to get approved for a car loan. You may see there are things you need to do to get yourself to a good place, so you can get the loan.

Do you feel you need more help in the personal finance arena? Our site has many different articles that can help you as you’re trying to get your new car.

Browse our site, find your favorite personal finance articles, drop a bookmark, and come back soon to read more.

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