There aren’t to many people these days paying cash when buying a car, so this means they must borrow the money. There are several places offering car loans – credit unions, banks, and even big dealerships themselves have a loan division for potential buyers. On the other side of the coin getting approved for a car loan can be a task, a task many buyers need help with.
Using a Loan Broker
Auto loan brokers get paid if your loan gets approved, so they have a lot of incentive helping you get your car loan approved. Loan brokers act as a mediator between the borrower and lender. They can work on a flat fee rate or percentage. If you decide to solicit the help of a broker, you will only work with that broker. In turn your broker will deal with several lenders on your behalf; this is a lot less headaches for you.
Borrowers with less than perfect credit can run into trouble getting their loan approved. This is where a loan broker can help. Since they deal with several lenders, the chances are pretty good that one of these lenders will approve your loan. If the broker – lender relationship is good, your broker can negotiate with lenders to get your car loan approved. In many cases they can get better overall terms for your loan compared to if you did the process yourself.
The Dealer – Financial Specialist
Every car dealer has a finance specialist. Some places call them “finance officers,” but it all means the same thing. These folks are sort of the “in house brokers” for the dealer. The difference is they work for the car dealer, but they have just as much incentive as the independent brokers to help you get your loan approved.
As mentioned, some dealers underwrite their own loans and this allows them much more latitude in the approval process. If not, then they still have access to several lenders who can help.
The process in a bank is:
1. You fill out the loan application.
2. The loan officer reviews your application and then submits it to the underwriters.
3. The underwriters do income verifications and other required steps.
4. Your loan is either approved or denied.
It all sounds rather rigid, but many times there is room for compromise if you explain past events. If you know there’s a blemish on your credit report, then be upfront with the loan officer. They will discover this anyway in the discovery process. If you explain the circumstances behind the situation, then the loan officer can communicate that to the underwriter. This will save everyone a lot of time and it probably will score points with the underwriter, being you were so honest upfront.
As a borrower your contact at the bank is the loan officer; you never see or talk to the underwriter. So the impression you leave with the loan officer will determine how much they will, or will not, help with getting your car loan approved.
Don’t underestimate how much you can help yourself get your car loan approved. Here are the three areas you need to look at:
1. Credit Score
2. Down Payment
The first step is: Don’t ask for a loan for a Cadillac when you can only afford a Ford. This shows lenders you’re not responsible and it projects an irresponsible first impression.
Credit Report Mistakes: Credit reporting agencies make mistakes all the time, and it doesn’t take much to request a report from each of the three agencies. Take an hour or so and go over the reports for errors. Finding and correcting any errors will increase your credit score and quite possibly help get your auto loan approved – this is a great proactive step to take.
Down Payment: The more down payment you have, the better chance you have of getting your loan approved. Between a trade-in and cash you should at least have 10 percent of the purchase price of the new vehicle.
When you buy a car almost everyone in the process has an incentive to help you get your loan approved. If you prepare yourself, just a little bit, then getting approved will be a lot easier.