When buying a car, most of us will need to get a loan. If you’ve never applied for a loan before, it’s helpful to have a set of guidelines. Here, we’ve got a list of tips that should improve your chances of loan approval.
Figure out Your Credit Score
Knowing your credit score is the first step to take before you get a loan. Check to make sure your information is correct and that your identity hasn’t been compromised. It will also tell you what to look for in your loan offer. The federal government gives you one free credit report per credit scoring agency per year, so take advantage of it. There are also several free and paid apps and websites that will help you monitor your credit. Regular monitoring can help ensure your credit information stays safe and allows you to rectify any errors if you find any.
Comparison Shop for The Lender that Fits Your Needs
Picking the right lender could mean you can get your loan even if you don’t have the best credit score. Major banks often automatically turn down loans to anyone who has a credit score below 700. Still, some lenders are more likely to loan smaller amounts of money to those who are in the process of rebuilding credit than others.
One of the best ways to find a lender with flexible credit requirements is to ask for recommendations or check out reviews online.
Check on Your Debt-To-Income Ratio
A high debt-to-income ratio can be a strong indicator of your inability to pay your future debt and might make you ineligible for a loan, irrespective of your credit score. Banks want to make sure you repay your loans, and a high debt-to-income ratio is a red flag. If over 40% of your monthly income is being used to repay debt, your chances of loan approval are low. To improve your chances of getting approved, make sure you have the income you need to repay your loan before you apply.
Lastly, paying down any existing debt and finding someone to cosign your loan will go a long way to getting your loan approved.