3Rivers Blog

The 5 Moves You Need to Make to Get Financed for an Auto Loan

Posted on Monday, December 15, 2014

by Meagan McKean, 3Rivers Member Sales Specialist

Ever wonder where you should start when you know you need to buy a new car?  Have you wondered if you have the credit to get a great car financed at a great rate?  Or maybe you are a new borrower and have no credit established? At 3Rivers, we have many members asking these question and others related to getting financed for a vehicle. Your credit union is a great starting ground on getting you into a car that you will love, and one that meets your budget. 

How to Get Approved for an Auto Loan | Image source: Shutterstock.com / Photographer: Syda Productions

Review Your Credit Report

Before stepping foot onto a car lot, it would behoove you to find out what is being reported on your credit report as well as a score.  You can obtain a free credit report from www.annualcreditreport.com.  You can obtain a copy from each reporting agency Equifax, Experian, and Transunion.  It is important to know that these reports will not have your actual credit score. You may request your score, however you will have to pay in order to receive it.

Once you receive your reports, make sure to review all your open reporting lines.  A line, or trade line, is any account that you make payments to that report to the agencies, such as: credit cards, auto loans, mortgages, and term loans.  Any collections or late payments more than 30 days past due will be listed as well.  If you see any discrepancies, it is best to dispute and have them corrected.

Why is all of this so important?  Knowing your credit report is going to help you better understand why you will be offered the interest rates that you are on your future auto loan.  Most of us know that the higher the credit rating, the better interest rate, generally speaking.  This is not always the case since many lenders do not approve or deny loans based solely on credit.  The whole picture must be taken into account.  If you are a new borrower with no credit history, that last statement was for you! 

Create a Budget

Your first step will be establishing a budget.  A budget is going to tell you many things about your personal cash flow, but more importantly, you are going to get a sense of what you can and can’t afford.  The last thing you want to do is put yourself in a position in which you are living outside of your means.  Honest lenders are going to keep you from this situation to avoid any losses on both sides of the lending table, but it’s still a good idea for you to know what you can afford before seeing a lender.  If you don’t know where to start, you can utilize our Savvy Money Check Up tool. 

Save Up

If you are not in a really big hurry to finance a car, it would be wise to take any additional leftover funds you’ve discovered in creating your budget and put it aside once a month as a “payment” to yourself to go towards a car payment.  After six months to a year, you will have a nice chunk of money set aside for a down payment, which will equate to less money needing financed for the loan.

Get Pre-Approved

The next logical step is to get a pre-approval from a reputable lender, like 3Rivers. Approaching a lender first for a pre-approval will help you avoid a situation in which you find a car that you love but later discover you do not have the means to finance.  Also, you will be better prepared for the aggressive onslaught of a dealership doing the financing for you (and I make that statement out of personal experience!) 

A pre-approval is simple to do. All you will need to bring with you are personal references, identification, and  proof of income, unless you already have a direct deposit set up at the financial institution you are approaching to get financed.  A pre-approval is going to tell you the price range to shop from and give you a basic idea of a rate.  Also during this process, you will find out whether or not you will need a cosigner.

Seal the Deal

Once you give the lender more information, such as a VIN, your lender will be able to make a firm offer on an interest rate and terms.  If you want to buy from a private seller, you will want to request a blank purchase agreement that the lender wants you to use.  If you are making a purchase from a dealer, they will typically have their own purchase agreement they can draw up for you. 

A purchase agreement will give lenders all the details needed to write a comprehensive loan.  Those details include the VIN, any additional features or add-ons, details of the seller, trade-in amounts, sales tax amounts, and down payment amounts, plus any applicable fees.  Once the lender has all the information needed to give a firm offer, you will be able to close on the loan and finalize the purchase for the vehicle.

We know that the process of getting an auto loan can be confusing and stressful. I hope this information is of value and has helped in at least getting started in the auto loan process.  Knowledge is key for getting financed for any loan, particularly an auto loan.  You can always stop into one of our branches to speak with a member sales specialist to talk about any specific questions about your needs and situation, or give us a call at 1-800-825-3641 or (260) 490-8328 to get the conversation started.