Get Pre-Qualified for a Loan
Car dealers have a reputation for selling extended warranties, rust protection, and other add-ons you might not want or need, to drive up their profit margin—and your monthly payment. The best way to safeguard yourself against predatory practices is doing your homework beforehand and getting pre-qualified through a bank or credit union. This protects you when you arrive at the dealer because (1) it allows you to see if the dealer is offering you good terms (2) it gives you bargaining power and (3) it grants you options.
To get pre-qualified for a loan through your bank or credit union, fill out a credit application, which will ask for:
- Name, date of birth and Social Security number
- Current and previous addresses and how long you’ve lived at each place
- Occupation, current and previous jobs and names of employers, along with how long you worked at each place
- Additional sources of income and total monthly income before taxes
- Information on credit cards or other existing loans
Keep in mind that any time you apply for credit your creditor checks your credit score, which could bring your credit score down if creditors check it too many times in one year. This means you should apply to get pre-qualified for a loan that you are very serious about taking.
Do NOT be tempted to fudge any of these numbers. All of them will be checked and you could get in big trouble if you don’t tell the truth. Plus, you don’t want to lie on this because if you don’t qualify for the loan you applied for you probably can’t afford to pay off that loan in the first place.
If the lender approves your application, you’re set—just take pre-qualification paperwork to the dealer as proof you’ve got a lender who’ll finance whatever portion of a car’s purchase price you don’t cover in a down payment.
Don’t feel bad if you don’t get pre-qualified. The lender denied you because they thought you might not be able to pay off your loan, meaning you just dodged a bullet. Try finding a car that is a little lower in price range. We promise you this, driving a less expensive car is way more fun than drowning in debt.
| Pay Attention to the Dealer's Terms |
