How to Apply For An Auto Loan

Hubler Auto

How to Apply For An Auto Loan


Cars are expensive machines, and let’s face it: unless you’ve been saving pretty seriously since your first high school job, most of us don’t pay cash for our vehicles. That means that we have to take out loans from a bank to be able to afford a new (or new-to-you) car. A car loan is a serious decision, though. You’ll be responsible for paying back the loan, and if you miss payments or default on the loan, it will ruin your credit. Most importantly, realize that whatever price you agree upon paying for the car, you’ll be paying the bank more than that with interest. In any case, here’s what you can expect when applying for a car loan.


Credit Score

When you’re applying to banks for a loan, they’re going to look at your credit score to determine your default risk. If you have a low credit score, most lenders are going to assume that you won’t be paying them back. This means they will assign you a higher interest rate, to help ensure that they get their money back. On the other hand, if your score is higher, you’re more likely to pay your loans back on time, and they may assign you a lower interest rate.


It’s important to know your score before you go shopping for loans. If you have a low score, it’s in your best interest to build it up by paying off old bills or eliminating your debt. There are a number of secure websites that can help you find your credit score.



Some dealerships are one-stop-shops when it comes to buying cars. They have relationships built with a variety of lenders, and when it comes time to buy your car, they can feed your information to a number of banks to see who can offer you the best interest rate. This is an ideal situation. If the dealership from whom you’re buying your vehicle doesn’t offer this, make sure to shop around and apply to more than just one bank. Just like dealerships offer different cars with different amenities and mileages, different lenders will offer you different terms (loan repayment lengths) and different interest rates. Some lenders will have fees built into their loans, including early payoff fees (which means that the lender doesn’t get as much interest as they anticipated). Avoid lenders who attach fees to your loan, other than default or late-payment fees, which are universal.


It’s not a bad idea to come to a dealership with a pre-approved loan already in hand. This means you’ll have a potential loan with the best interest rate you’ve found. If the dealership is able to find you a better rate (with no fees), then you can easily go along with that one.


Getting Rejected

In some cases, banks will simply reject your application for a loan. In the long run, this may be best for you. If a lender rejects your loan application, it means that the lender doesn’t believe you have the capacity to repay the loan. That’s not necessarily a reflection of poor choices in your past, but maybe they don’t believe you can handle more debt than you already have. It might be saving you money in the long run.


If you do get rejected, reconsider. If you’re looking at a new car, considered getting a used one that costs less. Try saving up money that you can use as a down payment, which reduces your monthly loan payment. Do some math and work out what you think you can realistically afford over the term of the loan.

Posted in Buying, Certified, Financing, Leasing, Shopping, Warranty.