Top Mistakes People Make When Applying For Car Loans

Going into the car application process, there are several common mistakes that you should do your best to avoid. They can hamper your ability to get the best deal for yourself, and cost you money and peace of mind in the long run. Here are a few of those common mistakes.

Lack Of Preparation

There are several steps that you should take before you apply for a car loan. From knowing your credit score to outlining your budget range, you need to understand where you sit financially before initiating the car loan application process. Having an intimate understanding of all of these factors will give you the best opportunity to lock into an ideal loan for your dream car, and ensure that you don’t get taken advantage of by a dealership that doesn’t have your best interests at heart.

“Shopping Around” For Auto Financing

Getting and weighing several financing options might seem like a good idea at first, but seeking financing from multiple dealerships is a mistake that many people make, and it can end up causing severe harm to your credit. Even if your credit is good, having multiple credit checks in a short time-frame can make you appear to be credit seeking and lower your score substantially. Your credit information is private, which is why you only want to work with a credible company that has positive online reviews.

Focusing On Monthly Payments, Not Total Cost

When most people account for their car loan budget, they only take the monthly payments into account. While this is easiest and most logical when making your monthly budget that covers everything in your life, it may not be the best idea when considering your long term financial plan.

Lower monthly payments may fit in with your liquidity, but when paired with higher interest rates and/or a longer loan length, may cost you hundreds or thousands more dollars over the life of the loan. Taking the total loan cost that works best for you, even with slightly higher monthly payments, will result in a less stressful loan repayment process, and save you money as well.

Putting Your Desires Over Your Budget

Everyone can relate to the feeling of zoning in on something that they know they can’t afford, but breaking this bad financial habit can actually be better for you in the long run. There’s no shame in becoming enamoured with a specific car, but you always need to make sure that you can afford it, before you lock yourself into any deal. Getting pre-approved is a great way to avoid this, because it shows you the kind of range of car you can afford, and goes a long way to prevent opportunistic dealerships from giving you a financing plan that isn’t in your best interests.

How To Apply For A Car Loan

Before you leap into the car loan application process, there are several important steps to understand. Having a grasp on the intricacies of the process will help you navigate it with confidence, and ensure you get the best results for your unique situation. The following steps will help you understand what matters, what you need to do, and how each step of the process fits with the others.

  1. Know Your Credit Score

Your credit score is a great indicator for how the rest of the car loan application process is going to go for you. Having a clear understanding of what your credit score is, and what this score means in the context of applying for a car loan, is crucial to a stress-free experience.

Your credit score is basically a number outlining your reputation with creditors, and will be used by lenders to dictate the kinds of interest rates that will be available to you for your car loan. Knowing it not only allows you to set your expectations, but also gives you the opportunity to improve it if need be, resulting in better interest rates in the long run.

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  1. Know Your Budget

Figuring out how much you have to spend on a car loan involves parsing out several different factors. These include:

  • How much you can afford to pay over the life of the loan
  • How much you can afford to pay each month
  • How much interest you will pay at given rates

Once you have an understanding of these different numbers, you will have a more comprehensive grasp on your total budget. This will allow you to outline your car options, and keep you from overspending in a way that could harm your finances in the long term, and your quality of life in the short term.  

  1. Get Your Pre-Approval

Pre-approval is a lesser known part of the car loan application process, but it is something that helps put you in the right car for your financial status. Pre-approval gives you the status of a cash buyer, which strengthens your negotiating position with the dealership you end up going to. This is because the dealership has confidence that you have the financial backing to get into the car you’ve been pre-approved for, and that your financial status has been well-vetted by an appropriate agency.

  1. Choose Your Car

Once all of the loan application process is out of the way, and you’ve been pre-approved for a loan, it’s time to get you into a new car. Your Rocky Mountain Auto Credit specialist will help walk you through your options to find you a vehicle you love. By diligently following these few easy steps, you can ensure that you get the best car loan for your financial situation, so that you can feel comfortable in your new car, and not worried about your financial future.

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Things To Know About Car Loans Before Applying

In order to get a car loan that best aligns with your needs and desires, you should go in with a full arsenal of knowledge about the car loan process and its various aspects. By doing so, you will be in command of the loan application process, and won’t get taken advantage of by opportunistic lenders who don’t have your best interests in mind. Understanding the following factors will ensure that you’re well-equipped and empowered to control the loan application process, and reap the results that come from your preparation.  

Credit Checks

If you want to remember one thing about car loan applications, it’s that your credit score is king. It will determine what kind of interest rates you are offered by lenders, which will in turn dictate how much you end up paying for your car loan over its lifetime.

However, something that most people aren’t aware of regarding their credit score is that it actually decreases slightly when lenders check your credit history. A great way to avoid any lasting effects of this credit score decrease is to do all of your car loan applications within a 14 day period. By doing so, each lender inquiry is treated as just one check, which means that your credit score doesn’t take multiple hits. This will keep your credit score as high as possible, resulting in the best interest rates for your car loan.

Your Financial Footing

Knowing your financial situation inside and out is an important part of correctly navigating the car loan application process. Balancing your income, expenses, debt, and savings to determine what kind of budget you have for your monthly car payments requires an honest assessment of your financial footing.

Going into the application process with an intimate understanding of where you’re at financially means that you won’t overextend yourself pursuing a car/car loan that you can’t afford, setting you up for long term financial health, rather than more burdensome debt.

Dealership Financing

Car dealerships often draw in buyers who haven’t done their research with extremely appealing offers like 0% financing and cash rebates, but these deals aren’t always what they appear to be on the surface. These especially tempting offers only go to the best qualified applicants, with the best credit scores and histories, and if you don’t qualify as one of these people, the outlook can be a look more bleak. Always explore all of your options before settling on one, and make sure you know the ins and outs of your financing terms before agreeing to anything.


While we are looking into things to know before you apply for a car loan, it’s also important to understand the power that comes from being pre-approved for a car loan before you begin shopping for your new car. Pre-approval not only gives you the confidence that you have financial backing while on the lot looking at your car options, it also changes your standing in negotiations with the dealership.

Having pre-approval gives you the status of a cash buyer, which empowers you to get better interest rates while negotiating the terms of your car payments. Understanding the benefits of pre-approval is a crucial step in navigating the car loan process.

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What To Do Before You Apply For A Car Loan

When it comes to applying for a car loan, it’s important to educate yourself about what the process entails, what kind of loan you should be looking for, and how much money you have budgeted out to spend.

If you decide to just jump headfirst into a loan agreement without doing this research and preparation, or take your first option without shopping around, you can end up spending way more money throughout the lifetime of your loan.

This is a good reminder that paying off a car loan is more like a marathon than a sprint. Putting in your preparation before you commit to a loan and an interest rate is like the training you need to do before running a marathon. Preparing and educating yourself about the car loan options that are available, and which one will be best for you and your family, will ensure that you secure a loan that is best for your financial future.

Following these few steps will help situate you in a position to find the proper car loan, based on your financial history and automobile desires.  

Outline Your Budget Range

Giving your financial position an honest and thorough assessment before you begin applying for car loans is a key step in getting the best auto loan for your budget. One of the best ways to give yourself both certainty in what you can afford, and the flexibility to explore different options, is to calculate a budget range that you can work within.

You can do this by figuring out a best and worst case scenario for you financial future, and working out how much you have to spend on a car loan in both scenarios. From here, you can see what kind of monthly payment you can afford. This is a great place to start searching for an auto loan.

Know Your Credit Score

Understanding your budget range is your way of getting a grasp on what kind of car loan that you can afford, but you also need to understand what kind of car loan lenders are going to offer you. Your credit score will dictate the interest rates that lenders will extend to you, with a better score leading to lower interest rates.

Over the long run, these rates can lead to higher spending, so if your credit score is too low, it may even make sense to take some time improving your score before applying for a car loan.  

Understand Your Options

The number one balancing act to figure out when determining your options involves the size of monthly payments you’re making and the length of your loan term. Depending on the interest rate that you lock in, the amount you’re paying each month, and the amount you’ll pay for your car loan in total, can vary greatly.

This is where the difference between a trusted loan provider like Rocky Mountain Auto Credit and a shady used car dealership comes in.

RMAC will ensure you get an auto loan that works within your financial landscape, rather than just tying you to the first loan that finalizes a sale.

Apply today and get your pre-approval for a new vehicle