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How to Apply for a Car Loan


Auto Loan: Planning and Organizing

When you are in the market for a new vehicle, consider shopping for your loan separately. Prequalifying for a loan allows you to go into a deal with funds already lined up, which means financing isn't a discussion point until after you have most of the deal already worked out. Then, you can also bargain with the dealer for financing options. After all, you already have a loan lined up.

Don't know where to start? Follow these steps:

  1. Spend two weeks shopping for your loan. Each time you apply for a loan, the financing organization will pull your credit, which can have a negative effect on your score. However, all of the inquiries that take place in a two-week window count as just one [source: Dratch].
  2. Potential lenders will request different documentation. To facilitate the process, have the following ready: proof of income, credit and banking history, proof of residence, vehicle information (if you couldn't help yourself and went car shopping first) and proof of insurance.
  3. Fill out the loan paperwork yourself so you can ensure everything is correct.
  4. Pay attention to the total loan amount. Don't lose sight of what the total loan amount is. Some lenders may encourage you to spend more on the loan by simply extending the term, which decreases your monthly payments.
  5. Once you receive the loan proposal, don't assume the lender has offered you the best possible package. Let the lender know you are applying with other organizations. Avoid conditional financing, which means that you might not be locked in to your quoted loan.
  6. Use online tools to compare loans.
  7. Read your paperwork. Remember, this is a binding agreement. Watch for any language about binding arbitration, which might mean you can't go to court over a dispute. Make sure the contract includes everything you have been promised.
  8. Check the math.
  9. Check your lender through your local attorney general's office, Office of Consumer Affairs or Better Business Bureau.

Keep reading for a handy checklist of questions to ask potential lenders.


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