Car Loan from a Dealership

The golden rule in shopping for a car and shopping for financing for a car from a dealership is be realistic about which cars you can afford, and stay away from dealerships that claim they can get you a car with zero down and zero out of pocket.
Before you start car shopping do a budget and determine how much you can afford as a down payment and how much you want to pay monthly for a loan. There are calculators on line that will help you calculate what a specific monthly payment will support in a loan amount with assumed interest rates.

FICO Score Credit Report

You also need to obtain your free annual credit report from the three credit bureaus and make sure it is accurate.  You will want to get your FICO credit score and you will have to pay for that but is important to have.  If you find errors reported on one or more of your credit reports contact the creditor and the credit bureau and ask the error be corrected. You may have to supply documentation as to why the reported information is in error.

Bad Credit Car Loans from a Dealership

Once you are comfortable the credit report is accurate if your credit score is below 620 you will be considered a subprime or bad credit risk. There are lenders and dealerships who specialize in subprime loans and you will probably want to start you search with these lenders and dealers.

A condition of a subprime loan is that you will have to pay a higher interest rate than those with better credit histories. To ensure the best loan terms possible, you should strive for a down payment of around 20% of the total car price. Sure if you are desperate for a car you can put down less than 20% but it will cost you in higher interest rates over the life of the car loan.

Given what you know you can calculate the price of car you can reasonably expect to afford and begin your search in that price range. For example if you know you can afford to put down $1500 on a car look for cars in the $7500 range and make a 20% down payment. If you have $2000 for your down payment you can look for a car in the $10,000 price range.

Car Loan Dealership Information you will need

Now you can start shopping. Once you find a dealer who has cars in your price range and who you want to work with, the dealer will ask you for documentation to confirm your

• Identity
• Address
• Financial ability and
  
• Credit history 
• Last paycheck stub
• A driver’s license
• Utility bill to validate your residential address
• You may also need a recent bank statement
• Evidence of car insurance
• Some cases personal references

After the dealer determines how much you are qualified to barrow and the terms of your loan you need to review the terms to make sure you are comfortable with the interest rate, the length of the loan, the monthly payment amount and any other restrictions of the loan. For example you probably do not want a loan with prepayment penalties. You also want to avoid loans of longer than 48 months. Now you can narrow down your car choices to those that fit your loan and down payment amounts.