No matter how much you spend on your vehicle, sooner or later you’ll have to apply for a used car loan to finance the purchase. The financing process can be daunting if you’ve never done it before, but don’t worry we’re here to help! Whether you want to buy a used car or use your current vehicle as collateral to finance another car, there are several steps involved in the application process. Here’s how to apply for a used car loan in eight easy steps.
1) Get Pre-Approved
Before you start shopping for your used car, it’s a good idea to get pre-approved for a loan. This way you’ll know how much you can afford to spend, and you’ll be in a better position to negotiate with the dealer. Getting pre-approved can take as little as 30 minutes and can save you hours of time and potential frustration during negotiations.
Plus, being pre-approved may give you a better interest rate than if you were to apply for a loan after you’ve already bought the car. Once you have a lender or two that have offered rates that are within the range of what you’re looking for, find out their average APR.
2) Research Before You Buy
Planning to buy a used car? You’re not alone. According to Experian, the average car loan amount for a used vehicle was $19,331 in the fourth quarter of 2019, up from $18,438 in the same quarter of 2018. But before you start shopping for your next set of wheels, it’s important to do your research and understand the process of applying for a used car loan.
Your best bet is to get pre-approved with your bank. This means you’ve already completed most of your paperwork and know what options are available, so it’s just a matter of finding one that works for you. All major banks offer some form of vehicle financing, so whether it’s Citi or Chase, simply apply online using their preferred lender search tool or chat with their customer service team to find out more about used car loans.
3) Check Out the Basics
You’ll need to have a few things in order before you can apply for a used car loan. Most importantly, you’ll need to have a steady income and a good credit score. You should also have a driver’s license and insurance, as well as any required documentation from the dealership.
Once you’ve gathered everything you need, the process of applying for a used car loan is relatively straightforward.
The first step is to fill out an application form with your personal information. After that, the lender will run a credit check and verify your income and employment status. If everything looks good, they’ll send you an offer letter outlining the terms of the loan.
4) Decide What Type of Car To Buy
Now that you’ve decided to take the plunge and buy a used car, it’s time to start thinking about what kind of car you want. Do you want a sedan, SUV, or truck? Do you have a specific make or model in mind? How old of a car do you want? What size? Is your credit score high enough to get approved for a loan at all? Make sure to run your credit report before starting the process so you know where you stand.
5) Understand Financing Options
There are a few things to consider when financing a used car. The first is whether you want to finance through a bank, credit union, or dealership. There are pros and cons to each option. Then, you’ll need to decide how much you can afford to spend each month on a car payment. This will help narrow down your options.
For example, if you’re looking at a $5000 vehicle with an APR of 6% and plan to pay $400 per month, that would be 36 months. If you opt for a 5-year loan term, then your monthly payments would be around $100 per month higher than if you chose a 3-year loan term.
One last thing to keep in mind is what interest rate you qualify for (often determined by your credit score). If you have excellent credit, then you might qualify for rates under 4%. However, if your credit score is average or below average, rates may start as high as 12%.
6) Narrow Down Your Search
The first step is to find the right lender. There are many options available, so it’s important to compare rates and terms before making a decision. Once you’ve found a few potential lenders, the next step is to fill out an application. Be sure to have all of your financial documents ready before you begin. If you’re wondering how to complete a car loan application, eight easy steps can help!
7) Find a Certified Dealer
One of the first things you need to do when applying for a used car loan is to find a certified dealer. This is important because certified dealerships are held to higher standards by the manufacturer, which means they’re more likely to sell you a quality car.
Next, talk with their finance manager about your needs and budget. Depending on what type of credit score you have, this can be a very difficult step or an easy one. But it’s worth the time, either way, to see if you qualify. Find out whether they offer financing options, the next thing you should ask them is whether or not they offer financing options.
8) Get The Best Deal Possible
Do your research ahead of time and know what you can afford. Compare interest rates and terms from multiple lenders. Understand the difference between pre-qualified and pre-approved loans. Gather all the required documentation before applying. Check your credit score and work to improve it if necessary.
Read the fine print carefully before signing any loan documents. And finally, be sure to shop around for the best deal possible. Comparing interest rates and terms from different lenders is key to getting the best deal on a used car loan. If one lender offers better or worse conditions than another, then you should consider going with that lender.
Conclusion
If you’re thinking about purchasing a used car, you may be wondering how to go about securing a loan. Applying for a used car loan is not dissimilar to applying for any other type of loan. Keep these eight steps in mind when considering whether or not it’s time to apply for a used car loan
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