The Pre-Approval Process

Obtaining a car loan depends largely on the three C’s

Credit: You must be able to demonstrate a history of responsible credit and financial management. That means paying bills on time, limiting your debt and saving regularly. If you don’t know where you stand, make sure to get a copy of your credit report before you apply for a car loan. Your inquiry will not count, but lender inquiries will. Limit the number of inquiries initiated to protect your credit score.

Capacity: You will need to demonstrate that you have sufficient income to repay the loan for which you are seeking approval. Income from employment will be considered here. You may also choose to include secondary forms of income such as child support and alimony payments.

Collateral: Lenders are generally more comfortable with highly liquid assets that can be recovered in the event of default. In this instance, your car will serve as collateral.

When you are ready to apply for a car loan, a credit union representative can take your information via phone, Internet or completed application. Plan ahead so that you will not have to fumble for required information, such as gross income amount, account numbers, co-applicant information, if applicable, etc. You can expect a decision immediately in some cases.

Pre-approval for a car loan is not simply about getting a dollar figure; it is also about smart planning. When you plan ahead, rather than just showing up at the dealership:

You already know your price range
You know what cars are available in your price range
You have considered how your monthly payments and maintenance costs will fit into your budget. You understand how much you can expect to spend over the life of the loan. You avoid pre-payment penalties imposed with some dealer financing plans.

As a member, you will benefit from a number of loan options including those for people with less than perfect credit; still, the three C’s count. If you find that you cannot be approved for a car loan, consider making an appointment with Member Financial Services. This free service can help you identify and reach financial goals such as debt reduction, wealth building and retirement planning.