If you’re shopping around for a new or used car, like most people, you’ll need to finance your purchase. That means you will need to qualify for an auto loan.
What do you need to qualify? Each lender will have different requirements, but to get yourself prepared, here are the basics you should have ready before you start shopping around for an auto loan:
Credit History: You need to have a credit score to get an auto loan, but don’t worry – if your score is low, you can still be approved. Just be mindful that you could pay a higher price…meaning higher interest rates. So, do what you can to build or boost your credit score before shopping around for a loan, because the higher your credit score, the more likely you’ll qualify and receive better terms.
Proof of Insurance: To get an auto loan, typically, you must have liability coverage, and additional coverage like collision could also be a requirement, depending on the lender. And just like an auto loan, insurance providers use your credit score to determine your interest rate, so the higher your score, the better terms you’ll receive.
Verification of Income: Each lender will have its own set of requirements, but by being prepared, your auto financing process can be easier and faster. So, have copies of your most recent pay stubs or bank statements.
Bottom line, if you’re looking to buy a car, start saving and make a plan to build or boost your credit score before you shop around for an auto loan. You can get there by paying your bills on time, and if you’re renting, sign up with a service like RentReporters to have your on-time rent payments reported to TransUnion.