How to Get Approved for a Car Loan

If you're looking to buy a car soon, chances are you'll need a loan to help cover the cost. The average price of a new vehicle in summer 2025 is around $48,699, according to CarEdge. Used cars aren't exactly cheap either, with average prices hovering near $25,512.

The price you'll pay will depend on factors such as the make, model, and age of the car, and your negotiating skills. However, unless you have thousands of dollars saved up, obtaining a loan is likely part of the plan. And that can feel a little overwhelming—especially if your credit isn't perfect or you're not sure how much car you can really afford.

That's where we come in. At WorkMoney, we're here to help you navigate the car loan process with confidence. We'll break down the basics of credit, pre-approval, budgeting, and lender options. So you can make the best choice to save money, and get a car that fits your needs and your budget.

What Lenders Look For When Getting A Car Loan

When you apply for a car loan, lenders take a close look at your overall financial picture. They need to determine whether you can realistically afford the loan and make the payments on time. Below are the main factors that affect your chances of being approved for a car loan.

Credit Score and Why It Matters

Your credit score plays a large part in getting approved and what interest rate you’ll pay. Most lenders will check your FICO score, which ranges between 300 to 850:

• Above 700: You're likely to qualify for better rates and terms

• 600–699: You may still get approved, but you'll probably pay more in interest

• Below 600: Approval is still possible, but your loan may have stricter terms, a higher interest rate, or require a larger down payment

If your score is on the lower end, don't panic. You still have options. But improving your credit, even slightly, can help you qualify for the best deals.

Debt-to-Income (DTI) Ratio

The amount of your debt-to-income ratio (DTI) is key. It’s the percentage of your monthly income that you’re already paying toward debts. This can include credit cards, loans, or other regular payments. Lenders look at these numbers to determine whether your finances can handle another monthly payment.

Here are the general DTI guidelines:

• Under 36% (Ideal)

• 36%–41% (Generally acceptable)

• 43%–50% (May limit loan options)

• Above 50% (High risk to lenders)

Even if your DTI is high, that doesn't mean you'll automatically be denied. But, you may only qualify for a smaller loan, need a larger down payment, or need to apply with a cosigner.

Income Verification

You'll also need to show proof that you can repay the loan by having a steady income. Most lenders may require:

• Current pay stubs or W-2s

• Recent bank statements

• Tax return, or 1099s if you're self-employed

You may even qualify to get a car loan if you're unemployed. If you have income from other sources, such as Social Security, disability, or retirement, it still counts. You'll just need to provide documentation.

Required Documentation

You may need to provide additional documentation to move forward with your car loan, which includes:

• Valid driver’s license or state ID

• Recent utility bill, or lease agreement

• Car insurance card

Being prepared with these ahead of time can speed up your loan process and reduce going back-and-forth with the lender.

How to Get Approved for a Car Loan

Before you head out to shop for a car, it’s important to know how much you can afford to borrow without getting in over your head. That’s where getting a pre-approval can help. It means giving a lender permission to take a closer look at your finances so you can see how much money you may qualify for.

Here are a few steps you can take to strengthen your pre-approval—and improve your chances of getting the best deal.

Other Ways To Stretch Your Budget To Get A Car Loan

There are many ways to make room in your budget when you want to buy a car, such as:

• Programs like Lifeline and  LIHEAP (Low Income Home Energy Assistance Program): They’re benefits you’ve already earned. Even if you’ve never applied before, you might qualify and free up money for your car expenses or savings.

• BillCutterz helps lower your monthly bills, which may reduce your debt ratio and help you qualify for better loan terms.

• Insurify compares car insurance rates, which can reduce your overall cost of owning a car.

For example, Mary could use her tax refund for a down payment, get pre-approved, and reduce her costs with Lifeline. That combination could help her qualify for a loan she can manage, even on a $35,000 income.

Final Thoughts

Buying a car is a big decision, and so is taking on a car loan. But checking your credit, building a budget, and comparing lenders can help you save as much money as possible. Don’t just budget for the car payment—plan for the full cost of owning it. Even a small down payment or using programs you qualify for can help you get approved and stay on track.