It’s often not feasible to buy a new with cash upfront. Thankfully, some lenders provide the needed funds for the initial purchase, allowing the borrower the ability to make payments while driving the new vehicle. Prequalification for these car can help the process of buying a new ride by verifying your capability to repay the car loans before actually applying.

Here is how you can be prequalified for a car loan in seven actionable steps.

Know Your Credit Score

Some companies will provide you with a copy of your credit report for a fee that usually isn’t an outrageous amount. However, these fees can be avoided by going through companies that do the same for free. Credit Karma and Experian are two examples. Be sure whichever service you select has the records from multiple credit bureaus.

Car Loans

Knowing your credit score allows you to fix errors and repair what you can. Once this is done, knowing that number helps refine options for the best match for you among lenders as you search for them later on.

Gather Documentation

While you’re working through any credit improvements, it’s wise to also accumulate hard copies of evidential documents. These include, but are not limited to:

  • Government-issued ID
  • Residency verification (a recent piece of mail, a copy of your lease, mortgage payment, or utility bill)
  • Proof of employment or income
  • Proof of any supplementary or occasional income, like a second job or side hustle.
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As you search, later on, remember that not every lender requires the same list of documentation. Be sure to check with each lender, whether on their website or by giving them a call. Simply ask what they require for prequalification or preapproval.

Determine Your Budget

Take time to figure out what you bring from all sources of income each week, and what that adds up to at the end of an average month and a full year as well. Next, collect the sum for all expenses you pay throughout the month and year.

Knowing when each bill is due throughout each month will help you figure when it will be easiest to make a car payment too. Finally, subtract the sum of your expenses from the total amount you bring home from all sources of income. This will give you a smart look into what funds you have available for the purchase of your new vehicle.

Search for and Determine the Car You Want

There are several avenues you can take in this step. It isn’t a bad idea to research vehicles in more than one of these avenues. You can visit local dealerships, large and small if you prefer the traditional method.

You can also search online. For instance, there are many online car dealerships where you can buy a car 100% online. Carooga, which is a platform where you can buy a car online in Canada, can even tell you if you prequalify for the car loans.

Purchase Non-Owners Auto Insurance

Many auto agencies offer customers the chance to purchase a policy that covers you as a driver regardless of the vehicle you’re driving. Get quotes from several places and select one with the features you need that’s within your budget. Keep in mind that insurance will be a continuous expense to budget for alongside your car payment.

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Research Rates and Compare Lenders

There are many lenders out there, each with its policies, requirements, and interest rates. Make a list of the best lenders for your situation by searching online. Make a note of what each lender requires, the interest rate on the car loans, any incentives offered, and any special requirements you may have to meet.

Car loans can be obtained from several institutions, like banks, credit unions, and short-term loan providers. When you’ve listed up to ten choices, narrow your selection to between three and five places by comparing them. Make a new list of lenders you’ll be applying for the car loans with when the time comes.

Car loans qualification calculator

Ask each lender about Prequalification and Determine the Best One for You. A simple call or a quick email to a loan officer or lender can better prepare you for the final step in a few ways. First, asking about the prequalification requirements for each company gives you exact details of what each expects from you as a borrower.

If there are specific standards you’re uncomfortable with or under the bar of, then you can eliminate that company from your list. Second, knowing the lenders’ processes gives an added confidence when you’re fully prepared to begin. Finally, knowing these things prevents any surprises that may cause trouble later on.

After you’ve gotten in touch with them all and have a final list of two or three options, it’s time to start the preapproval process. Call each institution and ask to be considered for prequalification on an auto loan. Traditionally, you’ll set an appointment and go to their physical location for the actual car loans application. You can almost always get prequalified over the phone or on the company website.

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Once You’re Pre Qualified

It’s exciting to be preapproved for a car loan; it’s a mile marker passed as you get closer to driving your new ride. Apply for the car loans and if you have to wait for a response, contact the dealership and inform them of your borrowing status. Also, comprise a list of questions you want to ask about the vehicle or the dealership. Assuming all goes well, you’ll be cruising around in a new car within a week or so. Enjoy your new ride.

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