When buying a new car in Charlotte, one of your options is applying for an auto loan. For first-timers and inexperienced car buyers, the process of qualifying for a car loan can be a hassle. Here are some tips and guides that could help you speed up the process.
Organize the Necessary Documents
Whether you choose a preferred lender or get a car loan through a dealership in Charlotte, the first step will always be paperwork. Prepare all the documents you will need ahead of time for a smoother assessment.
- ID and Proof of Residence
You can use your driver’s license, passport, or government-issued ID for identity verification. Your driver’s license can act as proof of residence, but it should match the address on your billing statements.
- Proof of Income
All loans require proof of income to assess your capability of paying back the loan. Make sure to bring copies of your pay stubs with your credit and payment history and monthly bills. Some lenders will contact your employers directly. If you are self-employed, you might need to present a copy of your tax returns.
- Proof of Insurance
Insurance is necessary to protect your property in case of accident or theft. The law requires you to have insurance to qualify for a car loan. If you already have an active policy, make sure to let your insurance provider know within the grace period specified that you are purchasing a new car.
- Credit Banking History
Lenders look at your credit score to assess your trustworthiness in paying the loan. Different loan providers use different credit scoring systems, such as FICO.
- Car Info
Knowing the car details, such as the VIN (vehicle identification number) and the selling price, will speed up the process of qualifying for a loan. These could be found in the purchase order of the car you are buying. If you are dealing with a private seller, you might need to get a bill of sale.
- Trade-in Documents
If you are arranging a trade-in, make sure to have your old car’s title and registration. You also need to declare all damages that occurred to the vehicle during your period of ownership. You can get these documents from your dealership, usually for a fee.
Once you’ve gathered all your documents, all that’s left is to submit the requirements for assessment and wait for the approval.
Improve Your Credit Score Before Applying or Get a Cosigner
A credit score is one of the usual main concerns when applying for a car loan. While a high credit score raises your chances of getting approved for better loan terms, it is not the only deciding factor.
Lenders offer lower interest rates for applicants with good credit scores. However, some lenders are willing to approve loans despite a bad credit score. They might require a cosigner or give a loan with a higher APR (annual percentage rate).
Should you get an initial car loan with a high APR, remember that you have the option of refinancing your auto loan later on to reduce your monthly fees. Auto loan refinancing is pulling out a new loan with lower interest rates to pay your previous auto loan. This gives you more time to breathe while you pay off the loan and can help improve your credit scores in the long run.
Get Prequalified for a Car Loan
If you are still working out your financing budget and deciding what car to buy, getting prequalified for a loan is helpful. Lenders will collect basic information such as your income and employment status, credit score, and current debt obligations. Based on the information, they’ll give you an estimate of loan terms, ranges you could qualify for, and the amount you could receive if approved.
Getting prequalified gives you a better idea of loan terms you can qualify for without being locked in an agreement. You get more time to look for better loan terms, plan your budget or improve your credit score for a better rate. Since lenders won’t pull a hard inquiry on your credit score for a prequalification, it wouldn’t hurt your credit score at all.
If applying for a car loan is too daunting at this point, you can consider getting prequalified.
Financing the dream car you wish to drive in Charlotte doesn’t have to be a hassle. There are reliable lenders and credit unions you can check out to provide you with auto loan options that fit your needs and your budget.