An 8-step Guide to Getting a Car Loan

Credit report check

Check your credit report before you apply for a loan. Correct any mistakes you find in it. If possible, spend six months improving your credit score before applying for a loan.

Multiple lender applications

Approach large national banks, local community banks or credit unions, and online lenders when you apply for loans. Understand the terms and conditions and ensure you’ve saved enough for a large down payment. Make sure there are no prepayment penalties in the loan.


Once you’ve narrowed down your lender search, apply for interest rate quotes from them, and compare their offers. Get them to compete with each other, to get the best offer on the market. Apply for it with multiple lenders in the same two week period. You get more negotiating power at the dealer with a preapproval.

Budget setting

Your preapproval sets the maximum amount you can borrow. Now use an auto loan calculator to figure out the actual price of the car you can buy. Enter down payment amount, trade-in value of your current car, lending terms, add 10% to cover taxes and fees to find the monthly amount.

Find a car

Now check the terms of the loan to see if any car brands are excluded, dealership requirements, how the lender will send the money, and time restrictions on the loan offer. Once you have those details, have fun searching for your car.

Dealer loan offer review

Once you take your test drive and finalize the car, see if the dealer can beat your preapproved loan. The dealer may surprise you by beating the market rate. Just let them know you’re a cash buyer and preapproved, but open to a better offer.

Choose your loan

Once you find a loan with the best terms and conditions, read the contract before signing. Ensure there are no hidden fees, that it’s not a long term loan, has no add ons you didn’t request, and no early payoff penalty.

Make timely payments

Enjoy your new car, and ensure you make all your payments on time. If your credit score improves, you could even refinance the loan to a lower interest rate.