Applying for an auto loan in person is often the best way to prove to a lender that you are a good candidate for their financing services. There are other options for obtaining an auto loan such as using an online service but getting face to face contact with a potential lender allows you to put your best foot forward and present yourself as a financially responsible person despite your past credit issues. You want to appear well prepared. Get all your ducks in a row with an auto loan checklist prior to entering a lender’s office.
First take a look at your credit. You do not want to be surprised by any marks on your credit report that lenders will be able to see when they pull their own reporting. This also allows for you to search for any mistakes that may appear on your report. You can resolve these prior to applying for a loan so that you can ensure that your credit reflects properly the current situation you are in. If you do find any mistakes, you will have to send a written report to the credit bureau to request an investigation into this false reporting. Viewing your credit report also shows you the items that are currently affecting your credit such as overdue credit card payments. Paying off overdue balances can help to increase your credit score which will be beneficial when applying for an auto loan.
A substantial down payment can drastically reduce your auto loan payments as well as increase your chances at obtaining financing. You only want to have to borrow exactly what you need. The recommended minimum down payment is 20% of the purchase price. Making a sizable down payment helps to balance the depreciation of your car’s value. Once you purchase a car, the value decreases 20-30% within the first year. Providing a 20% down payment can keep you from owing more on your vehicle than it is worth. Not over borrowing is the best way to keep payments affordable. Review your budget and decide what a feasible monthly payment is. Some advice is to keep your auto loan payment at no more than 15-20% of your gross monthly income. Sometimes it is better to wait and increase your down payment so that you can decrease your monthly premium. The main thing is to know how much money you are bringing in monthly and know how much is going out monthly.
You also need to be well prepared with all the documents the lender may require. Get all your ducks in a row prior to entering a lender’s office. Included in the required documents are income tax returns, pay stubs, proof of insurance, and a driver's license. Also make sure that you have done your research on current market interest rates. If you do not enter the lender’s office informed then you will have no idea whether or not you are getting a fair or reasonable rate. There are many websites that can help you to calculate a monthly payment based on the interest rate generally offered to someone in your credit situation. Keep in mind that each lender is different and that online calculators are designed to give you some basic data based on a population and not you individually.
Know your situation and be informed. An informed 2nd chance car loan candidate has a higher likelihood of leaving their lender with a loan that they are comfortable with and can afford. Prepare and look the part of a responsible loan candidate.