Buying a new car can be quite thrilling, but the buying process can be confusing. It’s important to know the ins and outs of a car loan in the United States before going to the dealership and picking out your dream vehicle.
Applying for a car loan in the United States is fairly simple. All you need to do is submit an application to the lender and send in additional documents if necessary. From there, the lending company will review the documents to see if you are qualified or not. This could take anywhere from a few days up to a week, depending on the lender.
If you’re finally ready to step up and get the car of your dreams, then you need to know how to apply for a car loan in the United States and what to expect. The good news is, it’s a fairly quick and easy process. This blog will tell you how to apply as well as some other important tips and tricks for applying for a car loan.
How Do You Get a Car Loan?
The process of purchasing a new car is actually pretty simple and can be done in a few short steps. The hardest part of the entire process is getting approved for the loan. The process changes a bit when going through a dealership compared to a private seller. For the most part, the dealership will help you along with the application. Private sellers will not.
You can expect these three things to happen when purchasing a car:
- Complete the loan application. Of course, this is after picking out the perfect car. Once you know exactly which vehicle you want, you will need to start by filling out the loan application. There may be a variety of different information necessary, including personal and financial information. Read carefully to ensure you do not miss any of the important information.
- Submit any other information necessary. Sometimes a lender will require additional documents in order to process the application. For the most part, these documents mostly include income and expense documents and additional debt obligations. You will also need to provide information on the car, such as the exact make and model.
- Wait and see if it is approved. After submitting the completed applications and sending in any necessary documents, all that is left to do is to sit back and wait. Lenders can take a few days or up to a week, depending on the company. They may ask for additional documents although this is unlikely.
What Are the Requirements for a Car Loan?
Requirements for getting a car loan in the United States will change slightly depending on the establishment. However, when going to a dealership or private seller, you should always have the basics on-hand for your loan application. These documents include:
- A Government-Issued ID
- Proof of Income, Residency, and Car Insurance
You should also make sure that you are of the legal driving age of your province or territory. You will also have to consent for the lender to perform a credit score check. This will help them to determine whether or not you are granted the car loan or not. Most lenders will require at least a 650 credit score to be approved. However, this all depends on the lender and their specific requirements and rules.
Should You Go Through the Bank or a Dealership?
One common question everyone has when they are thinking about applying for a car loan is whether or not they should go through a bank or a dealership. There is also the third option of an online service provider. Which is the best option for an American?
- Going through a bank can be challenging. A bank is the most likely place to go for a car loan. However, the downside to banks is that they almost always require a good to great credit score. There is also the issue of several in-person appointments being necessary as well as a good amount of paperwork.
- Going through a dealership is convenient. Going through a dealership is one of the best options because you can get the car and the loan in one place. The major drawback is that they typically do not help those with a struggling credit score. They much rather prefer to work with people who won’t be a challenge or risk to finance.
- Online service providers are the best option. Online service providers are becoming more common and popular due to their flexibility. They understand situations and tend to work with those who have low credit scores. The application can typically be completed in a matter of minutes online and there are no unnecessary in-person appointments or endless papers to sign.
Other Factors to Consider
Here are a few other things to keep in mind when applying for a car loan:
- Pay attention to the APR. The APR, otherwise known as the annual percentage rate, will include interest and fees. Using the APR is the best way to compare costs between different cars and potential car loans. Don’t stop until you can find the best deal.
- Consider a down payment. Putting money down is always recommended because it lowers your monthly payment and makes you more likely to be accepted by a lender. Lenders typically say that 20% is the best option.
- Think of the loan term. It might seem like the best option to opt for a long-term loan because it’s cheaper, but you’re actually paying far more interest in the long run. Opt for a short-term loan so you can pay it off quicker and avoid interest.
- Check availability. Did you know that some lenders have car restrictions? Before applying, make sure that the car you’re seeking is able to be financed.
Getting a car loan in the United States is a quick and easy process. It’s best to go in with the required documents and have a good to great credit score for the best results. Also, pay attention to the APR and loan term to avoid paying unnecessary interest and fees.