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How do I get a bank loan for a car?
I know I need a car loan to get the new car I want. It's about $36,000, and I can feasibly chip in about $10,000. My mom had a bad experience with financing through a dealership, so I'd like to work with a bank instead. I have decent credit, so I think it could work well. How do I get a bank loan for a car?
Lauren Smith · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m sorry to hear your mom had a bad experience when buying a car with dealership financing. To get a bank loan for a car, follow these steps:
- Check your credit score
- Choose the car you want
- Shop around to compare loan rates
- Get preapproved for the loan
Knowing your credit score before you start shopping can give you a better idea of the loan rates you may qualify for. Generally, a score of 660 or higher will get you a lower APR and a shorter-term loan.
If you have a score lower than 660, you may want to consider getting a cosigner or making a large down payment. The $10,000 you have will help greatly here!
Since you’ve already selected the car you want, you know it costs around $36,000, and you intend to make a $10,000 down payment, you can expect to take a loan out for around $26,000. Note that it may amount to slightly more than $26K once taxes and fees are tacked on to the total.
When financing through a bank, you do not need to stick to your bank. You can shop around with local, national, or online banks—or even local credit unions—to determine who is offering the best rates.
Once you’ve selected the bank, you can apply for preapproval. You may be able to do so online. You’ll likely need the following information:
- Your birthday
- Your Social Security number
- Your income information
- Your employment details
Getting preapproval counts as a hard inquiry on your credit report. This translates into your credit score dropping by a few points. That said, apply for all your preapprovals within a two-week span, as this will result in only one hit to your credit.
After getting your car loan and heading to the dealership, you can use your preapproval when negotiating the price of the car. Then, once you’ve agreed on the price, inform the dealership of your intent to purchase the car with your chosen bank. You’ll have the keys to your dream car in your hands in no time!
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