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Qualifying For An Auto Loan


Most people need to take out an auto loan when they want to purchase a new or used car. But qualifying for an auto loan is not always easy. Credit mistakes, late bill payments, and low income levels can sometimes ruin a person's chances for a loan. When this happens, people often ask why they were denied and want to know how to qualify for a loan through another lender. But there are ways that you can qualify for an auto loan even if your credit is not the greatest.


Get your financial house in order

One of the best ways to qualify for a loan is to plan in advance. Stop making purchases with credit cards and pay off remaining balances before applying for a loan. This will help boost your credit rating and show lenders that you are responsible with your money. Making purchases on your credit cards before the loan has been processed may hurt your chances of receiving the loan. Try to hold off using credit cards until after you bring the car home. Even if you have missed a payment or two in the past, if you have consistently paid your bills for the past year or so, you should qualify for a car loan.


Balance your budget

The type of car you want to buy will matter to lenders. Try to find cars that are within your price range. When budgeting for your new car, include monthly insurance payments. This will give you a good idea of how much you can spend without using up all of your available income. Many lenders will not grant loans to those whose combined expenditure on the car loan, living expenses, and other bills exceeds a given percentage of their monthly income. Be sure to stay within your range and try to save a little extra money to use as a down payment. When lenders see that you are willing to put up your own money, they will feel more at ease about granting you a loan.


Choosing a lender

After you have found a car within your price range, and saved up money to use as a down payment, you will be ready to find a lender. There are many options for you to choose from including finance companies, banks, credit unions as well as the auto finance departments of major new car dealers. Local commercial banks have been eclipsed in the area of auto financing by the more aggressive finance companies who have been at the forefront of the thrust to make vehicle financing more accessible, competitive and all-inclusive. If you belong to a credit union, then you should apply for a loan through them as credit unions can also offer low interest rates. Before you decide on which offer to take up you should consult several potential lenders first to compare the various deals currently available in the market.


In-house financing

The main difference between going directly to a finance entity and using dealership arranged finance is the fact that the dealership is going to try everything in in its power to put you in the driver seat and for obvious reasons. Be aware, however, that you may also pay a higher rate of interest going this route, especially if you had difficulty qualifying for the financing.


Summary

Qualifying for an auto loan may require you to research your options and apply for several loans before being accepted. Planning ahead of time by getting your finances in order and finding a car that is in your price range will increase your chances. If you are buying a car for the first time and have little or no credit, you may also run into problems along the way. Being patient and trying different lenders will pay off in the end.



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