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How To Get A Car Loan [Quick Guide]

When you're ready to get a car loan, you want the process to be seamless. 

This quick guide will help you figure out how to get a car loan while qualifying for the best interest rate and selecting a top lender that meets your financial needs. 

It's easier now, more than ever, to get approved for a car loan, but you don't just want any loan. You want a car loan with terms that won't require you to pay thousands of dollars more over the life of your loan due to a high-interest rate or an excessively long repayment term. 

Check Your Credit

Your credit score has a significant impact on whether you qualify for a car loan and the terms your lender offers . While you can get a car loan with a credit score of 600 or lower, if you can ensure that your score is over 670, you will qualify for better rates. 

If your score is lower than the suggested number, take some time to review your credit report and create a plan to improve your score. This could mean fixing inaccuracies, reducing your credit utilization rate, or making more on-time payments to your creditors. 

Show Steady Income

Along with having a decent credit score, you will need to prove to your lender that you have a steady income to afford your car loan. You might be asked to show your pay stubs or W-2 form as proof of having a reliable source of income. 

If you're self-employed, you may need to show your federal income tax returns and bank statements.

Get Pre-Approved

Getting preapproved for a car loan is highly recommended.

During a pre-approval, your lender runs a credit check to determine how likely you are to get fully approved for a loan. Afterwards, you will be given a preliminary loan amount and interest rate so you can start looking for a vehicle. 

PRO-TIP:  Don’t tell the dealer the amount of your loan pre-approval until after you have negotiated your final price. If you provide the total amount it is very likely you will not be quoted a price lower than the pre-approval amount.  

When you have been pre-approved, you have more leverage for negotiation when shopping for your car. You also won’t be lured into the higher interest rate loans, often offered at the dealerships where you find your vehicle.

Going through the preapproval process allows you to shop around to see which lender can offer you the best terms for your loan. You can get preapproval from a few lenders then complete the full application with one, so you're not hurting your credit with too many hard hits. 

Make A Down Payment or Trade-In

When you have a down payment or offer a trade-in it may be easier to get approved for a car loan with good terms. That's because it reduces the amount you have to borrow. The more you can reduce your loan amount, the better. 

Here's the difference between these options:

Down Payment

When you make a down payment, you provide the dealer with cash to pay for a portion of the vehicle. This makes you more appealing to the lender because you're making an investment in the vehicle. That investment often enables you to qualify for better car loan rates. Reducing how much you borrow allows you to pay less each month and, ultimately, over the life of your loan. 


If you have a vehicle you no longer want, you can trade it in to the dealer. The value of the car will go towards the amount you owe on your new loan, as long as you own it outright. If you owe more on the vehicle than the value, you have negative equity and will need to pay the difference to your original lender. 

Another option is to sell your vehicle to a private party. You will likely make more than trading it in to a dealership but it will require more time and effort on your part. If you take this route, you can use the money to pay off the loan on the car if you have one. If you have money left after paying off the loan, you can apply that to the down payment you make on your new vehicle. 

How To Get A Car Loan The Easy Way

When you're ready to get a car loan, take the time to prepare in advance. As long as you have the income and credit necessary to qualify, you should be fine. 

When it's time to go through the preapproval process, consider the type of lender you want. Working with a credit union is a good option because they will likely offer you the lowest rates. Unlike most financial institutions, which are owned by stockholders and work to make profits for those investors, Credit Unions are owned by their members.  

At Advantage Financial FCU, we are dedicated to helping our members qualify for auto loans with great rates and flexible terms. It’s one of the many benefits of being a credit union member.

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