1. Check your credit reports first

The CFPB says the information in your credit report determines your credit scores, and your scores play a large part in the auto loan you are offered and how much interest you pay. A credit score is a prediction of how likely you are to pay a loan back on time, and the CFPB notes that most scores range from 300 to 850. You do not have just one score; it can differ by scoring model, data source and even the day it was calculated.

Get a free copy of your report from each of the three nationwide credit reporting agencies at AnnualCreditReport.com, and dispute any errors before you apply. Scoring models typically look at:

• your bill-paying history
• your current unpaid debt
• the number and type of loan accounts you have
• how long your accounts have been open
• how much of your available credit you are using
• new applications for credit
• whether a debt has been sent to collection, a foreclosure or a bankruptcy, and how long ago

From What is a credit score? (Ask CFPB) and the Take control of your auto loan: A step-by-step guide (CFPB, March 2024), read November 3, 2026.

2. Set a budget for the whole cost

Have a budget before you shop for a loan, and leave room for the other costs of owning a car: taxes, title and dealer fees at the time of purchase, plus insurance, gas, registration, maintenance and repairs for as long as you own it. The CFPB lists three ways to lower the cost of a loan: save for a larger down payment, buy a less expensive vehicle, and choose fewer features and options.

From the Take control of your auto loan: A step-by-step guide (CFPB, March 2024) (Budgeting for your auto loan), read November 3, 2026.

3. Get a loan quote before you shop

Banks, credit unions and dealerships are the most common places to get an auto loan. The CFPB suggests getting one or more quotes or a preapproval from a bank, credit union or other lender before you go to the dealership; a preapproval spells out a rate, loan length and maximum amount. The CFPB says that even with poor or no credit, a quote from a bank or credit union could help you save money. You do not need an existing relationship with a lender to apply.

Worried about the effect on your score? The CFPB says shopping for an auto loan generally has little to no impact: depending on the scoring model, credit inquiries within about 14 to 45 days usually count as a single inquiry.

With dealer-arranged financing, the lender quotes the dealer a "buy rate," and dealers are allowed to charge more than that rate. You can ask for a lower rate and show a better quote you received elsewhere. Read our guides to financing a used car and APR vs. interest rate.

From the Take control of your auto loan: A step-by-step guide (CFPB, March 2024) (Understanding your auto financing choices; Shopping for your auto loan), read November 3, 2026.

4. Borrow less, and weigh the loan term

A higher interest rate makes every extra month of the loan cost more. The CFPB's own example, a $20,000 loan at 4.75%, shows how the term changes total interest. A lower score can mean a higher rate, and the higher the rate, the more a longer term adds to total interest.

Example figures from the Take control of your auto loan: A step-by-step guide (CFPB, March 2024) (How the length of your loan term affects what you pay), read November 3, 2026. They illustrate the math only; they are not a rate quote or an offer.

A larger down payment, or a higher value for your trade-in, reduces the amount financed. The CFPB also warns that longer loans keep you at risk of negative equity, owing more than the car is worth, for longer, and that rolling an old loan balance into a new one can make the new loan much more expensive. Get a value for your current car with our trade-in form.

5. Consider a co-signer, carefully

If your credit history is limited or your score is low, a co-signer with good credit can increase the chance you are approved or get you a lower interest rate, because the lender relies on the co-signer's credit. The risk is real for them: a co-signer must repay the loan if you cannot, even though they have no right to the car, and late payments hurt both of your credit records.

The CFPB says a lender cannot require a co-signer if you qualify on your own, and cannot require your spouse to co-sign unless you are both applying. If you are told you need one, ask whether you would be approved alone and on what terms.

From Why would I need a co-signer for an auto loan? (Ask CFPB) and the Take control of your auto loan: A step-by-step guide (CFPB, March 2024), read November 3, 2026.

6. Know the trade-offs of buy here, pay here

Some dealerships finance loans in-house for borrowers with no credit or low scores, often with signs like "No Credit, No Problem!" You make your payments to the dealership. The CFPB says the rate is likely to be higher than a loan from a bank, credit union or other lender, and that buy here, pay here dealers and other lenders that serve people with poor credit are permitted to install devices that help them repossess or disable the vehicle if you miss a payment.

Watch the extras too. Service contracts, GAP insurance, credit insurance and similar add-ons are optional, their prices are negotiable, and financing them raises what you borrow. See what GAP insurance is before you decide.

From the Take control of your auto loan: A step-by-step guide (CFPB, March 2024) ("Buy Here Pay Here" dealership financing; Think about optional add-ons), read November 3, 2026.

7. Finalize the financing before you drive away

Before you sign, check that the Truth in Lending disclosure matches what you agreed to: the APR, finance charge, amount financed and total of payments, plus the number of payments, late fees and any prepayment penalty. Ask questions until you understand every line.

The CFPB warns about "spot delivery," when a dealer lets you take the car before a lender has approved the loan. If the paperwork is not final, the dealer could ask you to come back and sign for a higher rate or add a co-signer. You do not have to agree to a second deal; if you do not, the dealer has to unwind the sale and return your trade-in and down payment. It is always OK to walk away and come back another time.

After the purchase, pay on time. The CFPB notes that late payments bring late fees, can lead to repossession and add negative entries to your credit report, while a record of on-time payments is part of what scoring models look at.

From the Take control of your auto loan: A step-by-step guide (CFPB, March 2024) (Closing the deal) and What is a credit score? (Ask CFPB), read November 3, 2026.

Shopping for a used car at Elgin Auto Sales & Service Center

Browse our used inventory, start a finance application, or read about financing with us. Questions? Contact us.

Elgin Auto Sales & Service Center is at 1200 E. Chicago St. in Elgin. Our sales department is open Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m., and is closed Sunday. Get directions.

This page is general information based on the Consumer Financial Protection Bureau's published guidance, not financial or legal advice. Loan approval, rates and terms depend on the lender and your situation.