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How to Get a Car Loan
These six steps walk you through the basics of financing a car and finding the best possible interest rate.
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Shannon Bradley is a NerdWallet authority on autos and home services. Before joining NerdWallet in 2021, Shannon spent 30-plus years as a writer, content manager and marketer in the financial services industry. In these roles, she developed financial expertise and created educational content covering a wide range of personal and business topics. Shannon is based in Newburgh, Indiana.
Julie Myhre-Nunes leads the Auto Loans, Student Loans and Home Services teams at NerdWallet. Julie has over a decade of experience in personal finance. Before joining NerdWallet, she led editorial teams at Red Ventures and several startups. Her personal finance insights have been featured in Forbes, The Boston Globe and CNBC, while her writing has appeared in USA Today, Business Insider, Wired Insights and more.
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Getting an auto loan can be a fast process. If you meet credit requirements, it's likely you can walk into a dealership and drive away with a car and loan today.
But that approach can cost you.
With auto loan interest rates at their highest level in years, it's more important than ever to find the best auto loan option with the lowest rate for your financial situation. Knowing the steps to take when applying for an auto loan can help you get through the process faster, while increasing your chance of getting the best rate and lowest payment possible.
1. Check your credit report and credit scores
Before applying for an auto loan, get a copy of your credit report. You’re entitled to a weekly free copy of your report from each of the major reporting bureaus (Equifax, Experian and TransUnion) at AnnualCreditReport.com. You can request and see a report immediately.
Lenders will use your credit report to see how well you’ve managed credit in the past, so it’s a good idea for you to review it first. Look for errors — such as late payments that weren’t actually late or fraudulent accounts you never opened. If you find such errors, file a credit report dispute to correct them before you apply for a car loan.
A credit report is the raw material used to calculate your credit scores. Both the report and scores play a role in what interest rate you receive, the maximum amount you can borrow and whether you’re approved for a loan at all.
You will want to know your credit score ahead of time, but a credit report from the credit bureaus doesn’t usually include it. You can often get your credit score at no cost through your bank, a credit card issuer or a personal finance company — including NerdWallet.
Get score change notifications
See your free score anytime, get notified when it changes, and build it with personalized insights.
When approving auto loans, many lenders use special credit scoring models that emphasize a person’s payment history for previous auto loans. These models are slightly different from the main FICO and VantageScore models.
After you know your credit scores, check the average car loan interest rates for borrowers with a similar credit score. This information provides a general idea of what rates to expect when you start applying for loans. However, other factors specific to you, such as your credit history, will determine your actual rate.
In addition to credit requirements, you'll need to meet minimum income standards and show a stable work history, so track down a pay statement as proof of that.
Once you’ve checked your credit and gathered income information, determine where you want to apply for an auto loan. Here are some options to consider for financing a car:
Large national and regional banks.
Local community banks or credit unions.
Online auto lenders with no branch locations.
Aggregators that match borrowers to loans within a network of lenders.
Online car retailers like Carvana that have in-house financing when you purchase a car through them.
Dealership financing, which could be loans through a local bank or an automaker (called captive financing).
Even if you intend to apply for a loan through a dealership or online retailer, get loan offers for comparison from a bank, credit union or online lender. Your own bank or credit union may give you a preferred rate, especially if you agree to automatic loan payments from a checking account there.
Thanks to the internet, you aren't limited to local financing options. Go online to compare lenders on a wider basis and find the best auto loans available.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
Best for borrowers with good or excellent credit who want fast approval and funding to buy a new car.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
4.5
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
6.74 - 15.24%
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
Best for applicants who want to compare multiple new car purchase loan offers.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
4.0
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
6.24 - 29.90%
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
Auto Credit Express
New car purchase loan
Not yet rated
Best for new-car buyers who can’t qualify for a lower-rate loan through a traditional lender and need help finding a dealer with subprime lending.
Min score: 525
Amount: $5,000 - $50,000
Min. Amount$5,000
Max. Amount$50,000
Not yet rated
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
N/A - N/A
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
Once you’ve narrowed your search to a few lenders, it’s time to get loan offers with interest rate quotes for comparison. Lenders weigh factors in your credit report differently, so rate offers can vary greatly from lender to lender. Also, if you’re able to let lenders know they’re competing for your business, it may help you get a better rate.
When you submit your initial loan application, some lenders may respond with pre-qualified offers and some with preapprovals. These are different, and it's important to know what each one means.
Pre-qualification provides an estimate of the rate and loan amount you might qualify for, based on limited information the lender has about your credit history. It requires only a soft credit pull, so it won’t lower your credit scores. Pre-qualification is a useful tool, but the estimated rate you’re given could change considerably once a full credit check is done.
Getting auto loan preapproval is your ultimate goal. It’s a step up from pre-qualification and requires a hard credit pull, temporarily lowering your credit scores. Because the lender has more information about you and your credit history, the estimated rate should be closer to the final rate you receive upon loan approval. Some lenders do gather enough information upfront to go straight to loan approval, which also results in a hard credit pull.
When applying to lenders that do a hard credit pull, try to make all applications within a two week timeframe. That’s because multiple credit inquiries close together typically count as one and have less impact on your credit scores.
Neither pre-qualification nor preapproval are a guarantee that your auto loan will be approved, but both can help with comparing loans and budgeting for your car purchase.
Your loan offers will show the maximum amount you can borrow, the interest rate and an estimated monthly payment. Use an auto loan calculator to try variations on your loan offer. For example, input different car prices, down payment amounts, auto loan term lengths and rates to see how they change the monthly payment and total interest you pay.
You may decide to borrow less than a lender says you can, if it means a more manageable car payment. Determining your own maximum will help you set a budget for how much to spend on a car. When setting a budget, allow an additional 10% to cover taxes and fees.
Now that you have financing offers and a maximum car price in mind, it’s time to choose a car.
To avoid disappointment once your heart is set on a car, be sure to check loan offers for any lender requirements, like:
Excluded brands. Some lenders won’t finance certain types of cars, such as discontinued models or cars made by specific manufacturers.
Dealership requirements. Some lenders require you to shop through a specific network of dealers.
Private-party restrictions. If you intend to buy a car from an individual, make sure the lender offers private-party loans.
Time restrictions. Most lenders give you at least 30 days to move forward with a loan offer. If you think you may need more time, call the lender and ask to extend the offer.
If you decide to buy a car at a dealership or online car retailer, don’t skip applying for financing there too.
Car manufacturers sometimes offer financing with below-market interest rates for their brands purchased at a dealership. Online retailers typically have their own financing and access to a network of lenders, but most allow you to bring your own financing.
Be sure to mention that you have preapproved loan offers, and ask if the dealer or online retailer can beat your lowest rate. There’s no harm in asking to see how low your interest rate can go.
When you have all loan offers, compare all details and select the best one. An auto loan calculator can help with this final step, too. For example, it might appear that a loan with a lower monthly payment will cost less. But when you put information in a calculator, you might discover the loan has a longer term and will cost much more in total interest.
If you go with dealership or online retailer financing, you can just disregard your other offers. Paperwork will be handled for you, but be sure to read your financing contract before signing. Confirm there are no unexpected fees or add-ons you didn’t agree to, like gap insurance.
If you use a bank, credit union or online lender offer, follow the lender's instructions to complete your loan application and finalize funding. In some cases, a dealership representative will contact your lender to initiate funding.
If you’re buying a car from a private seller, your lender will work with you to disburse funds to the individual and pay off the balance of any previous loan.
These steps for how to get an auto loan are meant to help you find the lowest interest rate you can qualify for. If a lender sees a history of late loan payments or a low credit score — generally defined as the mid-600s or below — you may be approved only for a very high interest rate or not approved at all.
But committing to a high-interest loan on an expensive vehicle could lead to monthly payments you struggle to make. Stretching out the car loan term to reduce the payment could then result in becoming upside-down on your auto loan, or owing more than the vehicle is worth.
In this situation, if you don’t absolutely require a car right away, it might be better to spend six months to a year improving your credit and apply again. Paying down other debt balances and making payments on time can help bolster your credit so you qualify for a better rate in the future.
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