How to Obtain a Car Loan

December 08, 2016

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More than just having a good down payment to get a new car, a successful purchase will depend on the financing you get.

You already know the model of the car you want and you’re ready to get it, but you have no idea how easy or difficult it will be to get it financed.  Many buyers make the mistake of arriving at a dealer with no idea about how the process works. Will you be able to get a monthly payment that will fit your budget? Will you take out a loan for four, five, or six years?  In the end, these are some of the questions you should ask yourself before the day of the purchase to ensure you will make a good decision that will benefit your pocket.

Steps to apply for a car loan:

  1. Get to know your credit: If you’re financing a car for the first time, it is likely that you have no idea how important your credit score is to receive a loan. Your credit score will determine the interest rate you get, and it will make a difference between a higher or lower monthly payment. You can check you credit score online. There are even websites that allow you to check your credit score once a year for free.
  2. Request a pre-approval: Days or weeks before the purchase, check on the competitive offers and rates offered by the various financial institutions. When you decide on one, apply for a car loan. You can do this online or by visiting a local branch. Aside from considering competitive rates, check on other benefits, such as points in reward programs. Once the financial institution receives your loan application, they will contact you to ask you a series of questions, verify your employment, and let you know if you are a candidate to the loan. They will also offer you guidance on what you can do to get monthly payments for the approximate amount you’re looking for.
  3. Choose the amount of months for the loan: You can pay off your car in three, four, five, or six years. The time period you choose will depend on how much you want to pay per month. The lower the payment is, the more months you will need to pay off the loan, plus you will pay more interest. Remember that your payment gets added to the insurance coverage (which you may include in your loan).
  4. Choose the car you will take home: Select a model according to your budget. Maybe you had your heart set on a particular model, but when you do the math you realize the monthly payment, including insurance, is higher than what you expected.
  5. Before they hand you the key: Once you choose your car, the seller will contact your lender to close the deal. At that moment, they will close on other requirements regarding the insurance, warranty, and the license plate and tag, among other things.

Once you complete these steps, you will be able to enjoy your new car. The key to a successful purchase is to do your research and be organized.  For more information about car loan offers, click here. Visit our section Tips for Beginners, a guide for achieving your independence.

Subject to credit approval. Certain restrictions apply.

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