Here are a few considerations when applying for a car loan. The first thing to decide is if you are going to get the car loan through the dealer or independently from a bank or another lender. Getting a car loan through the dealer is the easiest and sometimes dealer through more goodies at you if taking the loan with them making it a better deal than going to an independent lender. However knowing what the market interest rates are can help you negotiate the dealer loan terms down. Even if you decide to get the loan from the dealer do some homework first and check what the market has to offer.

How fast will the loan be processed is another important factor. Dealers can process it on the spot since they have the incentive to sell the car. Other lenders might take anything from immediate processing to a few days. Part of the loan application process involves the lender running a credit check on you. Don't apply to many lenders since for example having multiple credit checks at the same time can hurt your credit score. It is important to align the time when you estimate you will need the money for the car to the period it takes lenders to approve the loan. If for example you plan to go and buy a car in a week make sure you apply for lenders on time so that when you go and get the car you have an approved loan in your hand that you can either use for cash or use for negotiating the dealer down.

Something to know that makes a lot of sense is simply what is the lender threshold for approving a loan? After all if you know for example that your credit score is 600 and a specific lender has a strict policy of only approving loans for applicants with credit scores higher than 650 why apply at all? You will just waste time and energy and at the end of the process be denied. Make sure that you confirm to the lender known requirements before applying.

How much do you need to loan and how much can you afford? At the end of the day lenders want to make sure that you can pay back the car loan. Applying for more money that you need or can afford to pay back will just result in your car loan application denied. Budget your income and find out how much you can allocate for the monthly car loan payment. Be honest with yourself because lenders are thorough and if you apply for payments you can not afford they will most likely figure it out and deny your application. After figuring out the monthly allocation you can in turn calculate the total loan amount that such a payment can support.

Know the terms. There are professional terms that the lender is going to use. It is good to know those in advance. Search online or buy a book about car loans and leases. For example you should know what the following terms mean: interest rate, APR, money factor, prepayment penalty and so on.

Another important feature of car loans is a prepayment penalty. Some loans include provisions for prepayment penalties. In other words if you will end up paying off the loan before its predefined term ends you will have to pay a certain fine. In most cases such loans are cheaper but you should only get them if you are certain you will not end up paying them off early for example if you plan to receive some money and use it in the future to pay off the loan or if you plan to sell the car before the loan term ends.