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Are you ready to start vehicle shopping? Learning how to get an auto loan is a natural place to start. Getting pre-approved for a loan before you head to the car lot can make the entire process less stressful and help you close your deal faster.
Find out how to get approved for an auto loan, what lenders look for, and how to get the best rate possible.
How to get an auto loan
Step 1: Check your credit score
Your credit score is one of the biggest factors in your auto loan approval and interest rate. Use a free credit monitoring app or credit report to see where you stand before applying.
General credit score tiers for auto loans:
- 720+: Prime rates
- 660-719: Good rates
- 580-659: Higher rates
- Below 580: Subprime rates or denial
Step 2: Set your budget
Use an auto loan calculator to estimate monthly payments at different loan amounts and interest rates. A good rule of thumb is to keep your total monthly car costs (payment + insurance + fuel) under 15% of your monthly take-home pay.
Step 3: Shop lenders and get pre-approved
Getting pre-approved gives you negotiating power at the dealership. Apply with banks, credit unions, and online lenders. When you apply within a 14-day window, multiple auto loan inquiries typically count as one hard pull on your credit.
Step 4: Choose your vehicle and finalize financing
Once you have your pre-approval, shop for vehicles within your budget. When you're ready to purchase, compare your pre-approval with the dealer's financing offer and choose the better deal.
How to improve your auto loan terms
The best way to get a lower interest rate is to improve your credit score before applying. Even a modest improvement can save hundreds or thousands over the life of the loan. See our guide on how credit scores impact auto loans for more detail.
Conclusion
Getting an auto loan doesn't have to be complicated. Check your credit, set a budget, get pre-approved, and shop wisely. If your credit needs work before applying, Kikoff can help you build a stronger profile.
Frequently Asked Questions
Sources
- How do I get a free copy of my credit reports? — consumerfinance.gov
- How does a lender decide what interest rate to offer me on an auto loan? — consumerfinance.gov
- Can I negotiate the interest rate on an auto loan with the dealer? — consumerfinance.gov
- How does a down payment affect my auto loan? — consumerfinance.gov
About the editor
Disclaimer: The information provided in this blog post is meant for informational purposes only and does not constitute financial advice.
