How Can I Qualify for an Auto Loan?
When you’re ready to get behind the wheel, it’s time to apply for an auto loan. But if you don’t have the right qualifications, you’ll find a brick wall between you and your new vehicle.
The good news? You can do a little prep work to secure a loan. Before you fill out an auto loan application to get preapproved, check off the following items. And if you have bad credit, don’t give up just yet—we have action steps for you too!
What Do I Need to Qualify for an Auto Loan?
Have these items ready to make the application process faster and easier:
- Identification: Provide your government-issued ID, such as your driver’s license or passport.
- Proof of income: Lenders may ask for a recent pay stub, bank statement, benefits summary or W-2 form.
- Proof of residency: If your identification doesn’t show your current address, have a utility bill ready to verify your residence.
- Credit score: Your credit report is pulled whenever you apply for an auto loan. You can check your credit score for free every 12 months at Annual Credit Report.
- Down payment or vehicle trade-in: Save up for a down payment to lower your loan amount and interest rate. Or trade in your current car and use that cash for a down payment.
- Contact information: Have a working phone number and an email address if you prefer electronic communication.
How Could I Get Disqualified for an Auto Loan?
An auto loan might be your only option to get a car, but what if you’re denied? First, let’s look at the reasons you might not meet the qualifications for an auto loan:
- Debt-to-income ratio: In many cases, lenders will examine your current income to determine whether you can afford your loan payments. If your income is too low or your debts too high, you may be denied an auto loan.
- Application errors: Mistakes happen and can be missed on your application. Get an extra set of eyes to look over your application and ensure the information is accurate.
- Poor credit or no credit history: A low credit score or no credit history could prevent you from taking out a loan.
Now that you understand some of the scenarios, let’s look at what you can do to help:
- Reach out to the lender: Being initially denied isn’t the end of the road. Contact your lender and ask why you were denied. It might be an easy fix, such as correcting mistakes on your application. Knowing the reason will inform you about which steps to take next.
- Raise your credit score: Work on paying off debts and make on-time payments. If this hurdle is going to take a lot of time, contact a lender who works with poor credit scores. For example, UTF aims to serve our community. Our experts can learn about your unique situation and walk you through options.
- Get a cosigner: Get someone with a higher credit score and lower debt-to-income ratio to cosign your loan. You’ll still be responsible for paying the loan back, but having a cosigner will lower the risk for lenders and possibly the interest rates.
Apply for an Auto Loan Today and Get Preapproved
Ready to step on the gas pedal and find your perfect auto loan? Our devoted experts at UTF are here to guide you every step of the way. You can start the preapproval process by filling out an application or call us at 866-462-5532 today.