Bad credit may seem like a huge hindrance in the world of car shopping, but it doesn’t have to stop you from getting pre-approved for an auto loan. As long as you follow these steps and keep an open mind, you’re sure to find the car that’s right for you.
How Pre-Approval Works
Getting pre-approved is the first step in the used car buying process. It turns you from a virtual stranger into a “cash buyer” in just a short amount of time. Rather than showing you a bunch of cars you might not be able to afford, your pre-approval will let the dealership know exactly how much you can spend on a used car and that you’re definitely able to buy from them.
What You’ll Need to Bring
Don’t show up empty-handed and assume that they can look up all your important information online. At the very least, you’ll still need a bit of paperwork and your driver’s license.
Proof of Employment: This is the single biggest determinant for getting you pre-approved. Bring in your most recent pay stubs, enough to show that you’ve been on the job for some time.
Valid Driver’s License: A valid Canadian license is needed in order to buy a used car in Canada. This just makes sense, as the dealership will need to know that you can legally drive the car off the lot. It also helps them look you up in the system and verify that it’s you based on the picture and the information provided.
Bonus Item — Utility Bill: If you’ve moved recently, it’s a good idea to bring in a utility bill for proof of residency. Your address may be new in the system, so it helps to show that you’ve got your residence sorted out and will be living there for the foreseeable future.
Each lender will have their own basic qualifications for getting you pre-approved. Requirements such as a minimum income before taxes and a minimum time on the job are pretty common. They need to be sure you make enough each month to afford a car payment, and they also want to see some stability so they know you’ll pay your bill every month, not just the first month.
How a Down Payment Impacts Your Pre-Approval
A down payment could mean the difference between being approved or not. For starters, it lowers the amount you’ll need to get from a loan, which means less risk to the lender and could be the tipping point that gets you approved.
It could also ensure that you can take the loan out for a shorter time period while still getting the same monthly payment. Lastly, it demonstrates that you have the ability to produce a down payment in the first place, a good sign that you can handle future car payments.
Don’t Let It Go to Your Head
The thrill of getting pre-approved might make you feel elated and could alter your judgment, getting you to look at cars that you’re technically approved for, but will only lead to trouble down the road. Stay focused, and keep the following in mind:
They Don’t Know Your Monthly Picture: The lender only runs the numbers and tries to do the best they can to determine what you can afford based on the information you’ve provided. You are the only one that knows the amount of monthly bills you have coming in, as well as other obligations.
You may be approved for $20,000, but can’t float a car payment over $300. You should really talk through a monthly payment as you’re looking at different cars. Decide on your maximum comfortable monthly bill, and don’t look at cars that exceed it.
But It’s a Really Fun Time! Let’s face it, it’s fun to look at awesome cars with all the bells and whistles. Being pre-approved makes it that much harder to resist the temptation to buy something you really can’t afford. Do yourself a favor and just don’t look at them; stick to looking at cars you can enjoy without regretting later.
Come to the Right Dealership
At Ride Time, we make getting pre-approved as easy as possible. Let us show you how stress-free buying a car can be, even with bad credit. We’ll work closely with you and make sure everything goes smoothly right from the start.