If you’re getting ready to buy a car, you’re probably excited about the thought of driving off in your new set of wheels. But first, we’ll need to hit the brakes – since you can’t drive off without having your financing in place. The decisions you make leading up to and during the auto loan application process can affect everything from your approval odds to your interest rate and monthly payment. Luckily, learning what to do (and what not to do) before applying can make a big difference.

Don’t Fly in Blind – Review Your Credit Report

In our previous article on what to do if you’re not approved for an auto loan, we mention the importance of reviewing your credit report before re-applying for an auto loan. The same is true when applying for the first time. Your credit score and credit report will usually be the key factors influencing whether you’re approved for an auto loan, and if you are – the interest rate you’ll be offered. Review your credit report to ensure all the information is accurate and up to date before you apply for a car loan. Errors can mean the difference between being approved or not.

Do you see room for improvement in your credit score? Consider taking steps to raise it before applying for an auto loan, such as paying down balances and making on-time payments.

You’re entitled to a free copy of your credit report every 12 months from each credit reporting bureau. Visit AnnualCreditReport.com to get started.

Don’t Apply for New Credit

Credit applications, such as for a credit card or personal loan, can trigger hard credit inquiries – which indicate that a lender requested to see your credit report. Hard inquiries can cause minor, temporary drops in your credit score. Recent credit applications tell lenders that you might be looking to take on additional debt, which can raise concerns about your ability to manage repayments. Consider avoiding any new credit applications before applying for an auto loan.

Do Set a Realistic Budget

Before you start looking for a car, figure out what you can comfortably afford to pay each month. Although the monthly payment will likely make up the largest portion of your car-related expenses, it’s important to consider other costs associated with owning a vehicle:

• Insurance
• Gas
• Routine maintenance
• Unexpected repairs

Lenders will also consider if you can afford the loan before extending an approval. They will review your other monthly debt obligations, such as credit card or other loan payments. If a lender sees that you don’t have the income to support a new monthly car payment in addition to paying your other loan balances, they might be concerned you will eventually fail to repay the loan. Applying for a car you can realistically afford will improve your chances of loan approval.

Don’t Be Afraid to Research Multiple Lenders

There are many benefits to exploring your options from multiple lenders, like finding the lowest interest rate. Your local community bank and credit union may offer different auto loan rates than other lenders. A lower interest rate can save you hundreds of dollars over the life of the loan and even lower your monthly payment. A lower monthly payment means more money left for you to pursue other financial goals!

Many lenders offer loan preapproval options, so you can preview what rate, term, and monthly payment you’ll receive. This allows you to shop around for the best offer before deciding on a lender. If you’re looking for an auto loan in Monmouth or Ocean Counties, NJ – First Financial offers preapprovals on both new and used vehicles so you can shop with confidence.

Do Compare Financing Options

Various lenders will offer you different rates, terms, fees, and flexibility. Don’t forget to consider your local credit union when applying for a car loan. Credit unions are not-for-profit financial cooperatives, and can typically offer their members competitive rates and lower fees on various types of loans. Credit unions are member-owned and focus on building relationships with their members – meaning you’ll get personalized service and also know your lending decision was made locally.

If you live, work, worship, volunteer, or attend school in Monmouth or Ocean Counties and are exploring your auto loan options – visit one of our local branches, call 732.312.1500 option 4, or apply online 24/7.*

*Not all applicants will qualify, subject to credit approval. Additional terms and conditions may apply. Actual rate may vary based on credit worthiness and term. First Financial FCU maintains the right to not extend credit, after you respond, if we determine you do not meet our guidelines for creditworthiness. Current loans financed with First Financial FCU are not eligible for review or refinance. A First Financial membership is required to obtain an Auto Loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a Base Savings Account is required to establish membership prior to opening any other account/loan.