Car loans are not just meant for new cars; you can also apply for financing when buying a pre-owned vehicle. However, there may be some roadblocks, like stricter lender restrictions and higher interest rates, in the case of used car loans. The good news is that there are numerous places, including credit unions, banks, and online lenders, that offer loans for used cars. Below, we’ll walk you through the process of applying for a used car loan.
Check Your Credit Score
Your credit score has a pretty significant impact on the rates you are offered. The higher your score, the more likely it is that you will be approved for a low-interest loan offer with favorable terms. So, before you start shopping for vehicle loans, make sure to check your credit score. If your credit score is less than favorable, consider reviewing your credit reports for inaccuracies that could be dragging down your score. Of course, it is possible to get a loan even if you have poor credit. There are numerous lenders that work with people who don’t have a strong credit score. However, you might have to pay a high rate of interest in such a case.
Calculate how Much You Can Afford to Borrow
It’s important to know how much you can afford to borrow before you apply for a loan. A lender will determine what exactly you qualify for, but this amount will be based on their limited review of your financial situation. However, only you know what works for your budget. So, taking into account the down payment, vehicle ownership costs, and other emergency expenses, decide how much you really can afford to repay every month.
Research the Vehicle’s Value
New cars are sold at the manufacturer-suggested MSRP; however, the prices for used cars can vary significantly based on the vehicle’s history and condition. That said, it is possible to determine a fair price for a used car. To figure out the vehicle’s value, you can compare similar vehicles using third-party websites, review the vehicle history report, and get a professional inspection. The better the condition of the car, the higher it will fetch, and vice versa.