5 Important Factors to Getting a Car Loan

Your Credit Score

Whether your credit score is good or bad, you still need to know where you stand. Knowing your credit score and what's on your credit reports is key to your negotiating power as a car loan shopper.

If you aren't aware of what your credit is like, you can't counter a lender's offer with facts. When you know your credit score you can research the loan terms and interest rates borrowers with similar scores get, so you can get the best deal for your situation.

If you have good credit, typically a credit score around 670 or higher, you're more likely to be able to go to a dealership, choose a vehicle, get financing, and take delivery.

However, with a credit score lower than 670, you must get approved for financing before you can choose your car. Knowing your credit score allows you to shop with the right type of lender and helps you avoid having your credit pulled by lenders that can't help you – not all lenders are able to work with bad credit borrowers.

If you have poor credit you may have better luck financing through a subprime lender or a buy here pay here dealer.

Your Credit Reports

Not only is your credit score important, so is what's on your credit reports. The information in your credit reports builds your score. This info is payment history, amounts owed, length of credit history, new credit, and credit mix. Each of these factors has a value that combines to form your credit score. Payment history is the weightiest of the factors making up 35% of your score.

Your Income

In most cases, you must be able to comfortably afford an auto loan in order to qualify for one, especially with bad credit. This means having an initial income of around $1,500 to $2,500 a month before taxes, from a single source of income.

Additionally, you need to prove you're not already using too much income, and that your combined auto loan and car insurance payment don't take up too much of your income. This is known as your debt to income and payment to income ratios, and they help a lender see what you're spending.

Your Down Payment Amount

A down payment is typically required for bad credit borrowers, but it's an excellent strategy for anyone getting an auto loan. The more money you can put down, the less you borrow. This means you pay fewer interest charges and save money over time. Since interest charges accrue daily based on the balance of your loan, the more you put down, the more you save.

Down payments can also help keep you from staying in negative equity for too long, or keep you out of it entirely, depending on the amount. Because cars are depreciating assets, they lose value over time. Equity means your car is worth more than you owe on the loan. The more you make as a down payment, the smaller the gap between your loan and the value of the car. This means more chance you have to hold on to the equity in your car.

Your Vehicle Choice

Vehicle choice is important, and often very personal. However, getting the right car loan is important, and that means choosing your vehicle wisely. New cars are an ever-increasing expense these days, and used cars are costing more, too. Weigh your wants and needs carefully so you can choose a car that meets your needs and stays within your budget.

Knowing how much to budget for your car depends on the price of the make and model you pick. Additional expenses can stack up quickly, and some of them can be expensive. If you choose an expensive vehicle it's more expensive to insure. In many cases, you're also paying more to get more expensive vehicles licensed. Plus the more you spend the higher your taxes.

Ready to Get Started?

If you're ready to get started on an auto loan now is the time, and we want to help. Here at Auto Credit Express, we know what it takes to get a car loan no matter your credit situation. We've gathered a coast-to-coast network of special finance dealerships that are signed up with the lenders to help credit-challenged consumers. Simply fill out our fast, free, auto loan request form to get started, and we'll get to work matching you with a local dealer.