Can I Get Approved For An Auto Loan?

• Author: William Asher
• Posted: 2024-10-06

Lenders are making it easier for consumers to get approval for an auto loan. The good news is that your credit no longer has to be perfect.

Nationwide lenders will work with car buyers to find a loan that fits your budget with affordable payments.

Since reliable transportation is an integral part of life, auto loans are among the most popular types of consumer loans.

Auto dealerships around the country will work with car buyers to secure the financing they can afford. More auto sales increase their profits.

Car Dealers Encourage Buyers To Finance Through Them

Car dealers make a more significant profit when buyers finance through them. Dealerships can realize more profits when they increase their APR or annual percentage rate on their customer's auto loans. Car dealerships often have relationships with a variety of auto manufacturers and lenders. Filling out one application may mean a buyer receives multiple loan options that may include incentives from manufacturers. This process allows financing through a dealership to your advantage.

What Are Buy Rates

Here's an example of how buy rates work. One lender offers you an auto loan with an APR of four percent, while another offers a five percent APR. Those percentages are the buy rates. Car dealerships are offered a finder's or flat fee from the lender as a reward for sending them their business. However, one lender may increase the APR to seven or eight percent, which is the deal they offer the buyer. When a car buyer agrees to those terms, the two or three percent difference goes to the auto dealership.

The Difference Between Preapproval And Pre-Qualification

A lender will do a hard credit pull to determine if you can get pre-approval for an auto loan. When you choose the car or truck you want to buy, the exact terms of the loan from the lender you receive from the lender should be similar or the same as the terms of the pre-approval. However, the terms will depend on the vehicle you choose. When a buyer is prequalified for an auto loan, the lender only has to conduct a soft pull and should be considered a soft offer.

How Do Multiple Applications Affect Your Credit

Many consumers in the market for an auto loan have concerns about applying to multiple lenders before they accept an offer. Multiple applications are a common practice since buyers want to shop for the best price and lowest payments. However, if all your loan applications are done within a period of 14 days, applying to a variety of lenders that offer excellent terms shouldn't have an adverse effect on your credit score any more than only applying to one lender. You could apply through the dealership, a bank that offers excellent rates, or your credit union at work.

How Do You Determine The Best Option For An Auto Loan?

If you're a first-time buyer, the loan process can be confusing. Many buyers that haven't established credit history may think they don't qualify for a loan. Some buyers don't want a credit check run because they believe they won't be eligible. Auto dealers are in the business to make a profit, and buyers could use this to their advantage. You don't know what offers you may get until your credit is checked. It would be best if You allowed the dealer to run your credit through its network of lenders.

Here's how it can work in your favor. You've already applied to several lenders, and the dealer comes back with an offer from the lender that offered the higher interest rate of seven or eight percent. You show the dealer your offer with the lower rate you were approved for. See if they're going to beat the offer. When an auto dealership has to make the decision to make a smaller profit than they anticipated as opposed to losing the sale, most will decide to work with the buyer and come up with an offer that's acceptable to both parties. Although the process may seem confusing, by doing some research, you should be able to find several lenders that will work with you.