Tips If You Need to Get Approved for a Car Loan

As you probably know by now, there’s a difference between applying for a car loan and having your application approved. While the former can be done smoothly enough, the latter is an altogether different story. Luckily, there are numerous ways for you to increase your chances if you really need to get approved for a car loan. Find out about them by reading the list below.

Boost Your Credit Score

We’ve said it before, and we’ll say it again: You need to have a good credit score if you want to have your car loan application approved. The minimum required would depend on the bank or lending firm, but it’s been proven that you need at least 650 points to qualify. So you even start browsing for loan products, best do everything in your power to make your credit history better. You can do this in many ways, including decreasing your credit utilization ratio, keeping your extra credit card active, and taking advantage of score-boosting programs.

Have a Steady Income Source

Income is also an essential factor to think about if you need to get approved for a car loan. Without a stream of income, you wouldn’t be able to repay your car loan, much less have your application approved. Thus, you need to be employed before you visit the bank or lending company. Keep in mind that your chances would be higher if you’ve been employed (or self-employed) for at least two years. So while preparing your certificate of employment and other required papers, best make sure that your documentation attests to how long you’ve been working.

Prove Your Identity and Residence

Speaking of paperwork, you need to prepare documentation to verify your identity and area of residence as well. Banks and private lending firms prefer handing out auto loans to citizens of the country where they operate. And to prove your citizenship, you need at least two valid, government-issued IDs.

Furthermore, moneylenders would require that you give a proof of residence to make sure you are currently living in the country. So best prepare your latest copies of bills before your appointment, too!

Get Pre-Approval

One way to gauge your chances of getting your car loan the thumbs-up (and maybe increase it along the way) would be through pre-approval. Doing so not only enables you to more accurately review your credit report and run a soft credit check, but it also allows you to determine the loan amount, interest rates, and payment terms you’ll get in your situation. Moreover, in case you don’t pass pre-approval, then at least you’ll know that you need to seek financial help elsewhere. Besides, pre-approvals and soft credit checks won’t hurt your credit score, so no worries there.

Take note, though, that not all banks and private lending firms offer pre-approval. And some of them might also require you to pledge an asset as collateral during the pre-approval process.

Ready a Down Payment or Collateral

If all else fails, prepare a down payment or collateral. Banks and private financial companies tend to trust borrowers with down payments more because they’re less likely to default on a car loan. They also look more favorably on applicants who are willing to pledge one or more of their assets as collateral.

Through down payments and collaterals, you’ll be able to increase your approval rates even with a weak or non-existent credit score. You also get to enjoy other benefits, such as more loanable amount, more favorable interest rates, and better repayment terms, among others.

Final Thoughts

Following the tips above would not ensure that your auto loan application would get approved, but it can definitely increase your chances. So if you seriously need to get approved for a car loan, best make sure to use these pointers before your appointment.