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Things You Need to Know Before Getting a Used Car Loan

There are many things you will have to prepare and consider when getting a used car loan. Learn more about our tips and tricks for setting yourself up for success with used auto lending.

You may be considering getting a used car loan for your next vehicle purchase, but have some questions. Consider these tips as you prepare to get a used car loan and a new-to-you car!

Qualify For A Used Car Loan

Preparing to purchase your next car begins by ensuring you’ll qualify for a loan. The best used car loan will feature favorable terms, including a low-interest rate and affordable down payment.

To verify that you’ll qualify for a loan that meets your needs, check your credit.

Lenders use your credit score and credit history to determine how much money you can borrow and the loan’s interest rate. For this reason, request your credit report from one or all three credit bureaus.

If necessary, take steps to improve your credit score and boost your ability to qualify for a great car loan. In most cases, you can qualify for a car loan even if you have a low credit score, but you’ll earn a lower interest rate if you have a higher credit score. To boost your score, pay your bills on time and pay off credit card balances and other debts.

Understand Used Car Loan Terms

To understand the used car loan process better, familiarize yourself with the language.

  • Annual percentage rate (APR) - The interest you pay on the money you borrow.
  • Loan term - How long it takes to repay the loan.
  • Down payment - The amount you pay upfront before you obtain a loan for the outstanding balance.
  • Taxes and fees - The additional costs that are added to the car’s total and paid upfront or rolled into the loan.

Assemble Necessary Documentation

Several documents prove your identity and income, so collect the required paperwork before you apply for a used car loan. While your lender may request a more specific list, the general documents you need include your current and/or updated:

  • Driver’s license
  • Income proof, such as recent pay stubs or your tax return
  • Residency proof, such as a utility or phone bill
  • Social Security number for the credit check

Compare Used Car Loan Lenders & Loan Offers

Numerous financial institutions and lenders, including national banks, local credit unions (like us!), online lenders, and car dealerships, offer used car loans. You’ll have to consider your options carefully as you choose the lender with the best reputation and the best offer for your needs.

Because lenders implement unique underwriting techniques, expect to receive different quotes from each lender. However, each offer should include the amount you can borrow and the loan’s terms, interest rate, fees, and repayment length. Compare these numbers as you review loan offers and choose the right lender.

Obtain Pre-approval

You can negotiate a great deal on a used car and obtain the best loan option when you get a pre-approval. This written document outlines how much money you can borrow and the loan’s interest rate.

Lenders will check your credit to create a pre-approval letter. The hard pull on your credit will temporarily lower your credit score, but you can reduce any negative impacts by submitting all pre-approval requests within two weeks. The credit bureaus will group these similar requests as one rather than multiple credit requests.

Additionally, obtain pre-approval close to the time when you’ll buy your car. Some lenders only honor pre-approval for 30 days or another limited time frame.

Also, ask about lender restrictions. Sometimes, lenders exclude certain brands or types of cars from funding or require you to shop at a specific type of dealer.

Complete The Loan Application

After you select a used car to buy, you’re ready to complete your loan application.

Start by reviewing the loan details, including interest rate, loan term, and monthly payment. This step is important because, despite your pre-approval offer, your final loan details could be different than those listed on your pre-approval letter depending on the type of car you choose to buy, its value, and your personal financial information.

Next, review and approve any add-ons, such as gap insurance or an extended warranty. You may add these additional options to your loan or pay them upfront. You can also shop around for cheaper coverage elsewhere, or opt-out of these additional options altogether.

Take time to understand the pay-off terms, too. Select a different loan period based on your budget, and verify if you can pay off the loan early with no penalty.

Once you’ve accepted the loan’s terms, sign the paperwork. The dealer may now initiate the transaction with your lender, or your lender may issue a check to pay a private seller or electronically pay a dealer.

Are You Ready To Get A Used Car Loan?

Purchase a used car, and you gain reliable and affordable transportation.

To get a used car loan that finances your new ride, follow these simple tips. Consider your local credit union, too. These lenders generally provide used car loans with fewer fees and lower interest rates. Plus, you receive the preferred loan rate since you’re a customer and will build a relationship that’s beneficial beyond your car loan.

Learn more about financing your next used vehicle with Listerhill Credit Union!

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  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.