If you’re in the market for a new or used car, you’ll need to take out a car loan to finance the purchase. But how do you go about getting a car loan? What are the eligibility requirements? In this step-by-step guide, we will walk you through the process of obtaining a car loan, including eligibility requirements and tips on how to get the best interest rate.
What are the eligibility requirements for a car loan from a bank or credit union?
Before you apply for a car loan, it’s important to understand the eligibility requirements. Generally, lenders will look at your credit history and score, employment status, income level and debt-to-income ratio.
Here are some of the eligibility criteria you’ll need to meet:
1. Credit History & Score
Your lender may require a minimum credit score in order to qualify for a loan. This can vary between lenders but generally is around 500 or higher for an unsecured loan. The better your score, the lower your interest rate is likely to be.
2. Employment Status
Most lenders will require applicants to demonstrate steady employment over the past two years as well as having recently received regular paychecks from their employers.
3. Income Level
The amount of income you earn will also be taken into account when applying for a car loan. Most lenders require applicants to have a minimum annual gross income of $25,000 and an employment history spanning at least two years.
How to determine your credit score and what it means?
Most lenders use your credit score to determine eligibility for a car loan. A good credit score is considered to be above 700, but eligibility still varies from lender to lender. Different lenders also have different eligibility requirements and criteria when it comes to approving applications.
The easiest way to get your credit score is by ordering a free copy of your credit report from one of the three major credit bureaus- Experian, TransUnion, or Equifax.
The different types of car loans available and how to choose the right one for you
When it comes to eligibility for a car loan, there are several options available. From standard bank loans and dealer financing to online lenders, there’s something out there that can work for almost everyone. The trick is figuring out which type of loan is the right fit for your current financial situation.
To get started, here’s an overview of the four main types of car loans:
1) Bank Loans
Banks offer traditional loans with fixed terms and interest rates. They usually require a higher credit score than other types of financing options and may take longer to process an application.
2) Dealer Financing
Car dealerships typically offer their own financing packages, so you can buy a car from them and get financing in one fell swoop.
3) Online Lenders
These companies specialize in car loans and can sometimes offer better deals than traditional lenders. Their eligibility requirements may be lower than those of banks or dealerships, but it’s still important to compare the different offers available.