Madison Credit Union Blog

How Long Does It Take to Get a Loan? Our Simple Guide

How Long Does It Take for a Loan

When it comes to needing a personal loan, most people need them quickly. If you are facing an unexpected expense that you cannot cover with savings, you need access to funds without delays caused by a tedious loan application process or an unnecessarily long review period from the lender.

There are many different kinds of loans that take time. It’s not often possible to secure a student loan (even a private student loan) or business loan in a short period of time.

However, when it comes to a private loan or personal loan, these can be wrapped up in a matter of days, if not the same day. For borrowers with good credit, the loan approval process will likely take less time than for those who have less than stellar credit scores. Still, even applicants with credit issues can move through the loan process quickly.

Any of us can find ourselves in need of a loan when life throws unexpected curveballs our way. We may need a short-term loan to cover medical bills, a car loan to purchase a new car, or to keep a household afloat after a layoff.

Loans can be secured quickly and managed easily if you understand the basics involved, and we will walk you through that process here.

Waiting for Cash Credited to Bank

Two Ways to Get Your Loan

As we review the ins and outs of the loan application process, we will look at the timing associated with two different types of lenders: online lenders and banks/credit unions.

There are some general assumptions related to the way each of these categories works, though it is still advised to ask each specific lender for their timeline before you get started.

Working With Online Lenders for Personal Loans

One popular option for loans is the use of an online lender. Most of us are accustomed to managing so many aspects of our lives through online platforms, whether that means taking college courses, filing our taxes, or designing a plan for a backyard patio.

Online lenders are a convenient resource for those pressed for time, as you can apply for loan funds any time of night or day. The ability to “shop” the lenders online is also helpful, as you can search for consumer reviews and read up on what other people have experienced using a particular lender.

Laptop Beside Hour Glass

The timing will vary from lender to lender, but the basic time frame you can expect is as follows:

Application: The online lender application will take just seconds or minutes to complete for a preapproval. Essentially you are offering your social security number and income for a preliminary rate quote.

Many consumers are cautious about sharing a social security number and other personal details online, and rightfully so. This is why you should take some time to research and verify any personal loan lenders, making sure their site is secure, before sharing any details,

Time Between Application and Approval: If you get a preliminary rate quote from an online lender and wish to move forward, it will take another three to five days for final approval.

Lenders will be taking a closer look at your financial history to determine if they want to assume the risk of offering you a loan. This will involve a detailed look at your credit score and history as well as any other information submitted with your application.

Time Between Approval and Funding: Go ahead and bank on a few more business days before the fund hits your bank. This could be impacted by bank holidays as well, so be sure to confirm with both the lender and your bank.

It would be ill-advised to write the rent check or pay off any debts until you see that the funds have definitely hit your account.

From the time you apply with an online vendor, you could have funding within a few days at best, or it could be up to 10 days or more as you work out the loan term on your funds.

Working with Banks or Credit Unions for Personal Loans

While the convenience of online lenders is a big draw for some borrowers, there is also a significant benefit when it comes to taking the traditional route with banks and credit unions. Nothing compares to in-person customer service.

Building with Glass Windows

By working with a bank or credit union, you can go in and speak directly to a loan officer about your specific needs. This is a great opportunity to review all of the “fine print” associated with loans, and you will have an opportunity to ask for clarification on the loan type, interest, fees, penalties, repayment term, and more.

Best of all, if you use a bank or credit union where you already have a checking account or savings account, you may be able to negotiate better rates. It is also convenient to keep your loan account tied to your checkings and savings, for ease of having things in one central place.

When you log on to your bank’s mobile app, you will have a quick snapshot of your financial situation.

The timing associated with a personal loan from a bank or credit union will typically play out as follows:

Application: The loan application may be filled out in the bank or ahead of time online; check with them first to ensure you have all the right documentation if you are going to fill it out in person.

Time Between Application and Approval: With banks and credit unions it is possible you can get approved on the same day or within one business day. This will depend on their staff available to check all of the information in your application.

Time Between Approval and Funding: If you are already a customer of the bank or credit union and your loan application is accepted, there is a very good chance the funding will be in your account on the same day. In some cases, it may take 1-2 more days.

Final Thoughts on the Time It Takes to Get a Loan

The online lending process is convenient and a good option for those who can wait a week or more for funding. For personal loans with more urgency attached, it is a better idea to apply with a bank or credit union.


Four Tips to Help You Manage Long Term Personal Loans

Manage Long Term Personal Loans

A personal loan can provide tremendous relief when facing burdens such as unexpected medical expenses, a job loss, a divorce, or any number of circumstances. If your loan application is successful, you may find yourself finally able to exhale after a long period of stress and worry.

Whether it’s a short term loan, unsecured loan, installment loan, business loan, or any other kind of loan, getting this kind of financial help can be a huge relief.

However, that “exhale” should also be a turning point, one where you immediately begin to put a plan in place to pay the loan back. The management of a personal loan requires commitment from the borrower, and no one else is going to do this work for you.

Unfortunately, those who fail to properly manage personal loans, especially a long term personal loan, end up facing negative consequences.

A bad credit score, an inability to secure additional loans, and possibly the loss of assets as you figure out a plan for repayment can be difficult to handle.

The last thing you want as a result of a personal loan is an even worse financial situation. We have the tips you need to successfully manage a long term personal loan and regain your financial footing once and for all.

Start with a Budget

Many people find themselves in financial distress because they do not have a budget. This is the easiest way to get into credit card debt or other financial woes is to spend more than you make.

It’s important to keep tabs on the money coming in and out of your bank account, especially if you’re also managing student loans, credit cards, or other forms of loan repayment.

Sit down and write out all of your expenses, including an estimate for those you do not know offhand. Your rent, car payments, student loan payments, credit card payments, and utilities should be easy enough to pull from previous bills, and you can use a placeholder amount for food, activities, and entertainment.

Track those items to the penny over the next month, keeping up with what you spend on those categories. You may be shocked to realize your smoothie habit is draining an extra $100 out of your bank account.

This is where you trim the fat to create the funds to cover your long term loan. This can help you make a plan to hit every monthly payment, and build your way back to excellent credit.

Budgeting does not come easy for everyone, and fortunately, there are loads of helpful apps to choose from to keep you on track. Starting a household budget is one of the best things you can do not only to pay back your personal loan but also to stay in better financial shape going forward.

Person Holding with Samsung Galaxy Tab

Pay More Than You Can…On Time

Paying on time, each and every time is the name of the game when it comes to loans if you do not want to damage your credit score. This is why a budget is incredibly important, so you do not find yourself short of money when the bills are due because you overspent.

In an ideal scenario, you will also try to pay extra on the loan whenever possible. Paying early and paying extra will bring you significant benefits, such as

– A shorter loan repayment term overall (meaning less interest paid over time)
– The financial freedom to use that money in other ways once you have paid your debt
– An improved credit score and credit history if lenders report you always paid on time

Paying early is in many cases one of the best things you can do, but we must flag one very important warning here. Some lenders have a penalty for paying off a loan before it is due, and this is the “fine print” you need to review carefully before entering into any loan agreement.

Dane County Credit Union never charges an early pay-off fee, but if your loan is with another lender check out your loan term before you make a repayment plan. It is possible in these scenarios that your hard work to pay extra is completely negated by penalty fees like prepayment penalty. This is where you need to know your loan, inside and out, so you can make the best decisions about when to pay it off in your repayment period.

Even if paying “extra” is problematic, rest assured paying “on time” is never a bad thing. That is something you should live by as a rule set in stone.

Woman Using Drawing Pad


If you are managing multiple loans, a new loan option can come in the form of consolidating them. For many borrowers there comes a point where it seems impossible to pay back all of the debts, and they fail to make the minimum payment on any single loan.

A higher interest rate can catch you off guard, which is why looking at a loan’s annual percentage rate is so important. Debt consolidation offers a way for you to combine the loans into one monthly bill, paying them off at a potentially lower interest rate, or even a fixed rate.

The good news for many borrowers is that it is possible to lock in an interest rate in debt consolidation that is lower than the average interest rate on your loans. The “bad news” is that you will lose out on a longer repayment term, and have a shorter amount of time to pay back the debt.

If you can revisit your budget and continue to trim some fat to pay the monthly debt consolidation bill, you may find this is the best possible solution for you to get your financial house back in order.

Monitor Your Credit Score

Some consumers only worry about their credit scores when it is time to take out a new loan, perhaps when purchasing their first home or car.  But you should be monitoring this score regularly to ensure that your efforts to pay down your debts are reflected in your score.

By making on-time payments on your personal loans, you should see a positive impact on your credit score. If you miss payments, you can be sure the credit score will go down. A steady and consistently good score is what you want to position yourself for the best possible loans in the future, if and when they are needed.


Personal Loans: Final Thoughts

Managing personal loans requires organization, dedication, and commitment. If you can establish and stick to a budget, it will help you not only pay off the loan but also be in a position to better manage your finances going forward.

Enter into any personal loan agreement with a clear head and a clear plan for paying it back, and be sure you have combed through all of the fine print first to avoid getting hit with fees and penalties you may have missed.


Crunching the Numbers: Comparing Car Loans Before You Buy

If you’re in the market for a car loan, it’s essential to understand your options. From deposit amounts and loan terms to interest rates and fees, lots of factors can influence the availability and costs associated with auto loans. Whether you’re purchasing a new car from a vendor or buying a second-hand vehicle in a private sale, making smart decisions from the outset will help you to save money down the road.

Let’s look at car loans in the United States and how to compare numbers and options to ensure a great deal.

What are car loans and how do they work?

For most people, buying a car is a huge purchase decision that involves borrowing money. A car loan is a simple arrangement between one party who acts as the borrower and another party who acts as the lender. You borrow money in order to buy the car and enter into an agreement to pay back the funds over a set period of time. Along with the initial capital, the vast majority of loans involve interest, which is the price you pay for loan access. Most loans also involve fees, including one-off fees when the agreement is signed and ongoing fees throughout the loan term.

Key components of a car loan

While auto loans are simple in theory, making the wrong decision can be costly and hard to reverse. Before you take out a car loan, it’s important to understand the following elements:

  • Down payment – This is an initial payment made at the start of a loan agreement. While this upfront cost is not part of every loan arrangement, it is extremely common. A down payment is typically 20% or more of the car’s loan value, paid in cash as a vehicle trade-in or a combination of both.
  • Interest rate – This represents the ongoing cost of getting a loan, and this amount needs to be paid back to the lender in addition to the value of the car. The higher the interest rate, the more expensive the loan. When it is called the annual percentage rate (APR), it also includes ongoing fees as a yearly percentage.
  • Loan term – Also known as the loan duration, this is the time it takes to pay back your loan. There is a clear relationship between the loan term, monthly payments, and interest. While a longer loan term means lower monthly payments, you will end up paying more money in interest over time.
  • Principal vs. total cost – The principal is the amount that you borrow minus interest, fees, and other costs. The total cost is the total loan amount over time, including the value of the car and the price you pay for borrowing money. When comparing loans, the total cost is a more accurate indicator of the real cost.

Who issues car loans?

In the United States, car loans are available from multiple parties, with pros and cons associated with different providers and their products. Finding the right lender for your individual situation is central to every good arrangement. Most lenders can be split up into the following four categories:

  • Family and friends – You may be able to borrow money directly from your friends or family members. While this is not always possible, it does provide a number of advantages over commercial loan arrangements. Borrowing funds from people you know is often cheaper due to a lack of interest payments, and loans can be more accessible because down payments are not always required. However, borrowing from friends and family can lead to relationship problems.
  • Dealerships – Commercial vendors may offer dealership financing, among other options. Depending on their size and location, car yards may have existing relationships with multiple lenders. While this can make it easy to obtain finance, going down this road can be expensive and risky. You should try to avoid “buy here, pay here” offers aimed at people with bad credit or no credit history, as they often involve high interest rates and fees.

  • Mainstream banks and credit unions – Direct lending is available from traditional banks and credit unions, and it provides a number of advantages. Big banks and credit unions lend money every day, most of which are in a great position to offer competitive interest rates and fees. However, flexibility is not their strong suit, which can be a major disadvantage to anyone with a compromised credit history.
  • Community-based financial institutions – Smaller credit unions and community-based financial institutions are a great option for most people, where easy loan access is combined with competitive interest rates and low fee structures. Some smaller lenders have specific programs for people with bad credit scores or no credit history whatsoever. While the interest rates on offer are not always as low as mainstream banks, there are plenty of great deals available.

How to crunch numbers and compare car loans

Once you understand the basic elements of a car loan, you can start to compare loans based on the information available. Regardless of the service you use, car loans are typically paid back in monthly installments over the term of the loan. Your chief consideration as a potential borrower is to balance out the loan term with the interest paid over time in order to set up the ideal monthly payment structure for your needs.

  • Longer-term loans are likely to make your monthly payments lower — at the expense of higher interest payments and a greater total cost over time.
  • Shorter-term loans are likely to make your monthly payments higher — with the advantage of lower interest payments and a lower total cost over time.

Like many things in life, you need to weigh up short-term and long-term pain to find the best solution for your lifestyle. It’s not quite that simple, however, as interest rates also play a very significant role. Interest rates are set as a percentage term, functioning independently regardless of the term of the loan. For example, if you have a 5% interest rate, you pay that much interest regardless of the loan term.

  • Higher interest rates make your monthly payments higher, which leads to a greater total cost over time.
  • Lower interest rates make your monthly payments lower, which leads to a smaller total cost over time.

When you understand these details, comparing car loans can be easier than you think. With the following four elements, you can work out how much your loan will be and what you need to pay back each month.

  • The cost of the car
  • The down payment amount
  • The term of the loan
  • The interest rate

When you subtract the down payment from the cost of the car, you have the total cost of the loan. When you divide this amount by the term of the loan, you have the principal payment per month. When you multiply this amount with the interest rate, you have the final payment per month, which is what you need to budget for each month over the term of the loan.

Information you need before applying for an auto loan

In order to get a car loan, you’ll need to provide lenders with some information. While you need to complete a loan application, and lots of paperwork is involved, this process is relatively straightforward. Basically, the entity lending you money wants to get an accurate overview of your current financial situation and history. They need to know how much you can be trusted with and how likely you are to make repayments in the designated time period.

In order to check your current financial health, they will look at your employment records and bank statements to balance your income with your debt. In order to check your financial history, they will review your credit score and possibly look at past debt arrangements and records.

In most situations, you’ll need the following information during the application process:

  • Personal identification
  • Social Security number
  • Address — current and past
  • Bank statements
  • Employment income and data — current and past
  • Debt records and information

Auto loans by credit score

Once potential lenders have the information they need, they will start the approval process by checking your credit score and history. Your credit score is affected by open accounts, total debt levels, and historical repayment data. This simple three-digit number is produced by multiple credit reporting bureaus, with two primary credit score systems used in the United States and three prominent credit agencies.

  • Fair Isaac Corporation (FICO) produces the most popular score. This proprietary model pulls data from a number of agencies and situations.
  • VantageScore is a widely used alternative model, which uses data from three credit reporting agencies: Experian, Equifax, and Transunion.

Your credit score is based on a detailed analysis of your borrowing history and credit files, from mortgages and personal loans to utility and cellphone accounts. This score is used whenever someone is thinking about lending you money, from banks and financial institutions to utility companies and retail stores.

In the United States, your credit score is a number between 300 and 850. The following levels are typically applied to auto loans:

  • Superprime credit: 780-850
  • Prime credit: 660-779
  • Nonprime credit: 600-659
  • Subprime credit: 500-599
  • Deep subprime credit: 300-499

It’s important to note that your credit score can affect both loan access and loan conditions. For example, people with a higher score are more likely to be approved for specific car loans and to be offered lower interest rates in equal conditions. 

It’s also important to note that the application process itself can have an impact on your credit score. In most cases, the lender will pull a hard inquiry on your credit, which can cause a small dip in your score.

How do you get pre-qualified for an auto loan?

Before you get approved for a car loan, you can ask to be accepted for pre-qualification. While not a guarantee of approval, this initial offer does provide you with an agreed loan amount and interest rate. Pre-qualification is useful before you start shopping around for a car, as it gives you confidence and provides a bargaining chip at the dealership. In most situations, pre-qualification involves a soft pull of your credit, which means it won’t affect your credit score.

Interest rates for car loans in 2021

Collectively, interest rates change all the time based on the current federal reserve interest rate, the competitive banking environment, and wider economic conditions. On an individual basis, different rates are available based on the type of loan, the type of car, the loan term, and the individual lender. For example, loans for newer cars tend to have lower interest rates, as they carry a lower risk.

According to Experian’s State of the Automotive Finance Market, based on data from the first quarter of 2021, the average car loan interest rate was 4.09% for a new car and 8.66% for a used car. Credit scores can change things dramatically in terms of both loan availability and interest rate offers. For example, APRs can get down to as low as 2.34% for a new car and superprime credit score. On the other side of the coin, they can reach above 20% for a used car and deep subprime credit score.

The DCCU difference

DCCU is a trusted community-based lender offering competitive car loans to people in Madison and the surrounding area. We are 100% committed to the economic and social well-being of our members, so you can rely on honest advice, low fees, and great rates. We proudly help people from a range of socioeconomic backgrounds to overcome the challenges of car ownership. 

DCCU is owned by our members, with our financial cooperative dedicated to “building lifetime relationships through personalized financial service.” Along with easy loan access and great rates, we provide extended warranty protection and auto loan pre-qualification. We serve people in Madison and the surrounding counties of Dane, Columbia, Dodge, Jefferson, Rock, Green, Iowa, and Sauk.

If you want a car loan from a caring community-based lender, please contact DCCU today.



What is a Good Credit Score to Buy a Car – Here’s The Answer

Credit Score for Car Loan

When shopping for a new (or new to you) car, it is easy to get caught up in the excitement of four new wheels on the open road.

Perhaps you are looking at the convertible you have always dreamed of owning, or maybe you are simply upgrading your minivan after two toddlers wreaked havoc on your first one.

Car shoppers are easily excited by the latest bells and whistles on autos, and we fall quickly for things like heated seats, satellite radio, and even an overabundance of cup holders (you can never have too many cup holders).

In all of this excitement, it is easy to lose sight of the hurdles we may face when it comes to securing the loan for the car, whether that is through dealership financing, an auto lender, or a bank loan.

The dreams of putting the top down and cruising on a sunny day can quickly be squashed by the weight of a rejected or impractical loan, and in many cases that result could be down to your credit score.

A good credit score is an important factor in an auto loan. But how do you determine if you have excellent credit, poor credit, or a more average credit score? Here, we will explore just how good that score needs to be to make a car loan feasible.

How Does Credit Scoring Work?

If you are shopping for a car you should be familiar with how credit reporting and credit scores work, as well as your current credit rating.

There are tons of credit reporting agency options on the market today where you can find your score. If you do not currently have it, you can get a credit report for free at

Your fico score (aka a credit score) is divided into five categories:

300-579: Very Poor

Borrowers in this range are typically rejected by lenders. In the chance that they are approved, they will likely secure bad credit auto loans, and be required to pay some type of initial fee, a higher interest rate, or an upfront deposit to secure a loan.

580-669: Fair

Borrowers who fall into this category may also be referred to as  a“subprime borrower.”

670-739: Good

In this range, borrowers are more likely to be approved for loans, but not always at the best loan term rates.

740-799: Very Good

This category finds borrowers receiving much better interest rates on loans.

800-850: Exceptional

This is the ideal scenario for a borrower (and a lender, too, who has great assurance the money will be paid back). Here, you are considered a prime borrower, or a super-prime borrower.

Now that you know how the scores are viewed by lenders, you are probably wondering: “Which category do I need to be in to get a car loan?”

What Credit Score Do You Need to Buy a Car?

There is no one size fits all answer to this question as lenders do not all operate the same way. What is certain, however, is that those with a lower credit score will get higher interest and fees in whatever loan they secure.

Credit scores below 580 mean you are unlikely to get a reasonable loan; if your loan application is accepted by a lender, it will be subprime with extremely high-interest rates. It can be frustrating dealing with a bad credit car loan due to your credit score range.

Those in the lowest credit tiers are not the only ones challenged by the car loan process. Even those with a higher credit score can end up with interest rates that are often double what the best credit scores receive. While it may be possible to buy a car with any credit score, there is an ideal range you would want to be in if possible.

Credit Cards in Hand

What is the Ideal Credit Score When Buying a Car?

If you want the best possible financing arrangement when purchasing a new vehicle, the ideal credit score is 700 or higher. The closer you are to 850, the better the offer from the lender.

To put this in perspective, only 20% of the population is in the 800-or-higher range when it comes to credit scores. The majority of car buyers fall below the 800 range, though the ones with scores between 700 and 800 are still in a fairly good position.

Lenders see these buyers with higher scores as prime borrowers, meaning the credit score reflects the likelihood the borrower will make loan payments on time and pay off the debt in full. There is less risk for a lender to offer auto financing to a consumer with a credit score of 775 than there is with a score of 600.

I Have Bad Credit: Does This Mean I Cannot Buy a Car?

Bad credit will not stop you entirely from purchasing a car, but it will not make it any easier. You are going to have a hard time negotiating if you are already going in with bad credit, and the loan you may be offered will be subprime.

On the other hand, lenders expect to have a percentage of subprime borrowers, and they know that even with the risk involved this is where the real money is made on their end—on high-interest loans.

Therefore, even as a buyer with bad credit, you can feel assured you still have a decent shot at securing car financing. Then it is up to you to make sure you can meet the loan obligations by making your monthly car payment so your credit score doesn’t get worse.

Key Car in Hand

If you have a bad credit score and also need a car, you should weigh out every possible option before jumping into a high-interest loan.

Could you utilize public transportation for a period of time while working to improve your credit score?

Could you wait until you have saved up $5,000 or more for a down payment?

Could you have a family member co-sign the loan to reduce the monthly payment interest rates?

These are just some of the alternatives to consider to try and regain some financial footing that will ultimately help you improve your credit score.

In an ideal world, you will only sign on to a car loan once you have gotten your credit score up. However, if you absolutely need the loan now, look for a smaller bank or credit union for personalized service and an opportunity to discuss your specific scenario with a lender.


Credit Scores and Auto Loans — The Good, the Fair, and the Bad

Are you shopping around for a new car? Are you worried that your credit score will affect your borrowing options? A credit score is a simple number assigned to each person by one or more recognized credit bureaus. When you apply for a car loan or attempt to access any other kind of credit, this score is reviewed and analyzed by potential lenders.

Let’s review the credit score system in the United States, including some simple optimization strategies. When you have a basic understanding of credit scores and their implications, buying a new car can be easier than you think. 

Why your credit score matters

When people buy a new car, most of them need to take out an auto loan. Whether you’re borrowing from a mainstream bank, a car dealership, or a community-based lender, the institution lending you money wants to know how much you can be trusted with. They will use a variety of financial and employment records to measure your creditworthiness, and your credit score is a significant factor in this decision.

Above all else, lenders are interested in your ability to pay back the loan in the designated time period. Individual credit scores are an attempt to verify this ability based on historical data and current accounts.

What is a credit score?

Your credit score is a simple three-digit numerical expression produced by credit reporting agencies or bureaus. There are two primary credit score systems used in the United States. Fair Isaac Corporation (FICO) is the most widely used model, and VantageScore is a popular alternative. The former collects and tweaks data from multiple reporting agencies, and the latter collates data from three credit bureaus: Experian, Equifax, and Transunion.

Regardless of the model used, this number is based on a detailed analysis of your borrowing history and current credit files. While credit scores can seem like they’re set in stone, they do change frequently over time in relation to financial accounts and inquiries. Your credit score is widely used by financial institutions, along with utility companies, retail stores, and other entities that need to measure financial risk.

Personal credit scores are based on the financial history of each individual. Agencies use a closely guarded mathematical formula to collect and weigh data from multiple sources. Your credit score is also affected by open accounts, total amounts of debt, and repayment histories, among many other factors. While the credit score system leaves no room for discretion, it can be influenced by a number of factors firmly in your control.

In the United States, your credit score is a number between 300 and 850. Lower numbers represent less creditworthy individuals, and higher scores are likely to lead to more lending options. While not set in stone, the following levels are typically applied to auto loans:

  • Super-prime credit: 780-850
  • Prime credit: 660-779
  • Non-prime credit: 600-659
  • Subprime credit: 500-599
  • Deep subprime credit: 300-499

How your FICO credit score is created

If you want to improve your credit score, you need to have a basic understanding of how it’s created. Although there are slight differences between credit models, the basic information used to formulate scores is shared between agencies. And while the FICO score was developed in 1989 using secret algorithms, the way different elements are weighted has been released. 

According to FICO, the three-digit number assigned to you is based on the following factors:

  • Payment history comprises 35% of your score, which indicates your ability to pay bills on time.
  • The ratio between the outstanding debt and credit limits is weighted at 30%, which indicates the total amounts owed.
  • The length of your credit history makes up 15% of the overall score, which indicates your track record.
  • Credit account diversity represents 10%, which demonstrates your ability to manage different types of debt.
  • New credit makes up the final 10% of your score, which is based on recently opened accounts.

The link between credit scores and interest rates

Your credit score has a huge impact on whether or not you will be offered a car loan. Approval is not the only factor at play, however, with your score also affecting the interest rates available to you. As mentioned above, credit scores are one of the primary tools available to lenders to measure the risks associated with each loan. This is not a simple binary decision, as each lender offers different interest rates and loan terms in order to manage risk effectively over time.

People with a better credit score are generally deemed to be at lower risk, which means they are likely to be offered more competitive interest rates. While a compromised credit score does not always eliminate your lending opportunities, it will almost certainly limit you to certain interest rate brackets.

How do credit scores affect auto loans?

Not all loans are created equal, as mortgages are treated very differently from business loans, personal loans, and auto loans. In the United States, a prime credit score of 660 or above will give you plenty of car loan options, both from traditional banks and non-mainstream lenders. 

Prime credit scores are associated with very good interest rates, with highly competitive super-prime rates also offered by some lenders. Generally speaking, people with a prime or super-prime credit score will have access to the same lending opportunities, although the interest rates on offer may differ between these levels. If your credit score is below 660-680, however, you are likely to face higher interest rates and tough questions about your credit record.

If your credit score is below 600, you may have to meet more stringent documentation standards, and once again, interest rates are likely to be higher. If you’re down in deep subprime territory below 500, lenders will generally see you as a red flag. While people with bad credit scores can still get car loans in many situations, access to mainstream lenders may be ruled out.

How to optimize your credit score

If you want to get a car loan but have a less-than-perfect credit history, there are ways you can optimize your credit score. From checking reports and disputing errors to making payments and limiting new accounts, the following ideas are a great place to start.

Check your credit score

If you want to get a car loan, you should check your credit score first. This can help you to avoid nasty surprises and set realistic goals regarding car types, interest rates, and loan terms. According to the Fair Credit Reporting Act (FCRA), each of the three credit bureaus has to offer one free report each year when asked. You can easily check your credit report at, with separate scores also available from each agency.

If you want to review your FICO score, there are multiple options available. Along with commercial credit monitoring and reporting services, there are a number of ways to review your FICO score for free. For example, American Express and Bank of America customers issue free FICO scores to all cardholders, and Discover Credit Scorecard and Experian Boost provide a free score to all registered users.

Identify credit score errors

After you have checked your credit scores, it’s important to review them for errors and monitor them over time when changes occur. Mistakes are more likely than many people think, including clerical errors, identification errors, and historical errors due to divorce, separation, or family breakdowns. For example, if your ex-spouse’s information remains on your personal credit report, it can lead to errors. If you spot any kind of mistake, you should gather evidence and contact the bureau that issued the incorrect report.

Make your payments on time

Along with checking your records and recognizing mistakes, there are lots of proactive things you can do to improve your credit score. While you won’t see the benefits immediately, paying your bills on time is the most obvious way to raise your credit score. From mortgage and business loan payments to credit card bills and utility accounts, all of your household bills play a role in setting your credit score. If you struggle to remember payment dates, setting up automatic reminders or even just buying a calendar can have a positive impact.


Limit your credit accounts

As mentioned above, your credit score is affected by the number of accounts you have open and the number of inquiries you make. From the credit cards in your wallet to the frequency of new applications, simplifying your financial life can have a positive impact. For example, you should avoid credit limit increases on existing products, new retail store cards, and anything else that’s likely to affect your credit score. If you need a new card or service, you can avoid many issues by submitting pre-qualification forms.

Leverage alternative credit data

If your standard FICO or VantageScore is compromised in any way, you may be able to take advantage of alternate credit records. While not all lenders are willing to look at these non-traditional sources, community-based lenders and other non-mainstream institutions often have a more flexible approach. While a scoring formula is still needed to help lenders make decisions, the following two options are available:

  • FICO introduced the UltraFICO score in an effort to improve credit options for low-income people. This scoring system is based primarily on your banking activity.
  • Experion created a similar alternative with Experian Boost, which takes payment data from your utility and cellphone accounts into consideration.

Get a cosigner

If you’re looking for a way to circumvent the credit score review process, getting a cosigner for your loan can be very useful. While you are still personally required to make payments over the term of the loan, the cosigner’s credit score is used during the initial approval process. However, it’s important to understand the details of this arrangement, especially that the cosigner is held responsible if something goes wrong. If you are not careful, this can have a range of financial, legal, and personal ramifications. The cosigner’s credit score is not the only thing checked by lenders but also their income and debt to income (DTI) ratio.

Find the right lender

Upgrading your credit score is a great way to improve your chances of getting a car loan. There is only so much you can do, however, especially if you need a new car in a relatively short period of time. Along with your credit score, it’s also important to focus on your lender. There are lots of options out there, from mainstream banks and credit unions to commercial car vendors and community-based financial cooperatives.

Generally speaking, mainstream banks and credit unions will offer the lowest comparative interest rates, but they’re also the least likely to accept people with a bad credit score. Commercial car yards are on the other side of the spectrum, accepting people more readily but also charging extremely high interest rates. Some community-based lenders offer the best of both worlds, with easy approval and flexible loan conditions combined with competitive rates and low fees.

The DCCU advantage

If you want to get a great car loan but have a less-than-perfect credit score, DCCU is here to help. As a community-based financial institution, our lending service is based on honest advice, flexible conditions, and competitive interest rates. We help people from a range of socioeconomic backgrounds to find car loans and access other lending services.

DCCU is owned by our members, and our financial cooperative is dedicated to “building lifetime relationships through personalized financial service.” As a local neighborhood credit union, we proudly deliver great products and friendly service to everyone in the Madison community. Regardless of your credit score or financial history, our team is willing to lend you a hand. Please contact DCCU to find out more.



Loans for Low Income in Madison – Personal Loans for a Tight Budget

Madison Wisconsin City

Those with low incomes are often the people who need loans the most, but they find them the hardest to get. Lenders will assess borrowers in several ways, including their annual income and debt-to-income ratio (DTI).

Borrowers without much disposable income, such as those with low-income families, are deemed the highest risks. Lenders know that offering a loan to a low-income borrower means there is a chance the borrower will not be able to make their monthly loan payment during their loan term.

Securing a low-income loan may be challenging, but they are not entirely impossible. Here we will walk you through what you need to know in order to secure a personal loan and also offer some tips for what steps you can take if your personal loan application is rejected.

Loans for Low Income in Madison

What Do Lenders Consider a Low Income?

There is no one set figure that classifies a borrower as “low income,” and the figures may vary from lender to lender.

However, you can always look at your state’s area median income as a guide, and consider whether your current income has you falling above or below that number.

According to the U.S. Census Bureau, the median household income for the United States is $62,843. If your median household income is $30,000, you can be fairly certain a borrower would classify you as “low income.”

This does not mean an automatic rejection when it comes to your loan application, but it does mean you are facing an uphill battle in the process.

The good news is there are some participating lenders who will work with borrowers who have incomes as low as $20,000. This means it’s entirely possible to secure a low-income home loan, repair loan, or other forms of financial relief.

Before you approach a potential financial institution for your loan options, you will need to do some prep work to ensure your application is accepted.

Copper-colored Coin Lot

How to Get a Personal Loan if You Have a Low Income

Because you will never know until you try, now is the time to apply for a personal loan. Even with a low income, you can and should still apply for a loan if you really need the funds and have no other savings or ways to manage your expenses. Here are the steps you should take when you are ready to move forward:

1. Shop Til You Drop!

In this case, we mean shop around for the best loan—we certainly do not mean you should add more debt. Check out the rates available from different financial institutions for their offered loan program.

Be sure you also investigate their fees and read consumer reviews. You may want to find a program that has benefits such as loan forgiveness, payment assistance, and other perks that will make your monthly payment easier.

2. Apply

Once you have found the best possible options, follow the personal loan application process and submit your information so the lender can assess you as a potential borrower.

You will need to provide pay stubs as well as some other financial documentation. Be sure you submit every item the lender requests in the application; missing documents could slow down the application process.

3. Sign

If your personal loan application is accepted you will need to sign a loan agreement, but you should only do this after reviewing the fine print carefully. If you are a first-time borrower or at all unsure about the loan, ask a trusted family member or friend with financial expertise to review the agreement with you before you sign.

Black Smartphone Photo

I Am Unemployed: Can I Get a Personal Loan?

The answer to this question is yes, with some specific conditions. Being unemployed does not mean you will automatically be rejected in a personal loan application; however, you will need to show the lender you have some type of income, be it a pension, government benefits, or some other form of funding that would ultimately enable you to meet the financial requirements of your loan and make your monthly payments.

Additionally, self-employed people face a challenge with lenders who would typically ask for pay stubs in the loan application process. In this case, a self-employed individual may be able to satisfy the application requirements with copies of bank statements or tax returns instead of the usual pay stubs.

What Can I Do If My Application is Rejected?

It can be extremely discouraging to face rejection in the loan application process, but borrowers should not give up altogether. There are some proactive steps you can take to improve your chances of being accepted the next time.

Work on Your Credit Score

You can always obtain a copy of your credit report at, and any borrower should know where she stands in terms of credit score before applying for a personal loan.

You can improve your score by making on-time payments for any accounts you have already opened, paying down high balances, and making sure you have the right mix of credit.

It may seem counterintuitive to open a new credit account to help your score, but in some cases, this actually works to reverse bad credit (as long as you make your payments on time, every time).

Find a Loan Cosigner

If you have a family member or friend in better financial standing who would be willing to cosign your loan, this could increase your chances of acceptance. It could also lower the interest rate attached to the loan.

Seek Other Resources for Financial Help

If your loan application is rejected and you are in a dire situation with expenses you cannot cover (especially in cases where you may be facing unexpected medical bills), look into charitable financial aid organizations in your area that may be able to provide short-term assistance.

Alternatives to Personal Loans

Finally, there are also some alternatives you can try, such as payday loans or title loans (if you have a lien-free title to an automobile), but these should be last-ditch efforts as they have incredibly high-interest rates.

Credit unions often provide better interest rates to borrowers than other banks, and seeking a personal loan from a credit union, even with a low income, could be the best place for you to start.


Starting from Zero: Financing a Car When You Have No Credit History

Are you searching for a new car but confused about finance? Are you struggling to see a way forward with no credit history? Buying a car is an exciting time, but it can also be confusing and stressful. While unlimited funds will get you the vehicle of your dreams and a perfect credit score is a huge advantage, not everyone is lucky enough to be in this position. Whether you’ve just left home, migrated from overseas, or recently become independent, everyone has to start from somewhere.

If you have no credit history whatsoever, there is still a way forward. Starting from this position does make the road more challenging, but there are multiple options available. Let’s take a look at credit scores in the United States and review the impact of credit on your lending opportunities. When you understand the basic tenets of the credit landscape, you can make smart choices about your future and look for viable alternatives to get the car of your dreams.

What is a credit score?

In the United States, your credit score is a number assigned to you by one or more recognized credit bureaus. This simple numerical expression is based on a detailed analysis of your credit files in order to represent your creditworthiness at any particular time. Your score is based on your credit history, which is based on your open accounts, total amount of debt, and repayment history, among other factors.

Your credit score is a number between 300 and 850, with higher scores likely to lead to more lending options:

  • Excellent credit: 800-850
  • Very good credit: 740-799
  • Good credit: 670-739
  • Fair credit: 580-669
  • Poor credit: 300-579

While people talk about one credit score, there are multiple scores available based on individual credit reports created by different credit bureaus. The most popular credit score model was created by the Fair Isaac Corporation (FICO), which compiles data from multiple sources. FICO has a competitor in VantageScore, which uses data from three major credit reporting agencies: Experian, Equifax, and Transunion.

Why your credit history matters

When banks and other lenders decide whether to lend you money, your credit score is very influential in their decision. While they will also look at many other factors, including your income, debt levels, and deposit, they are primarily interested in your ability to pay back the loan in the designated time period. In the modern financial world where personal relationships don’t mean much, your credit history is a measure of how much you can be trusted with money lent to you.

How to check your credit score

Credit scores are developed slowly over time, which gives lenders a reasonably accurate overview of your long-term financial situation. When it comes to borrowing money, lenders don’t want to make decisions based on your current circumstances alone – they also want to review your history as a borrower. If you don’t know what your score is, you can check your credit report at Additionally, separate scores are available from each of the three reporting agencies.

No credit vs. bad credit

Having no credit is very different from having bad credit. If you’re just starting your financial life for any reason, you are said to have a “thin credit file.” Instead of a compromised score, this simply means that lenders don’t know how much money you can be trusted with. In contrast, a bad credit score means you have a history of borrowing and have faced difficulties along the way.

People have no credit history for multiple reasons, which is one of the challenges you will need to overcome. You might be young and just starting out in life. Perhaps you’re a recent immigrant to the United States or a newly independent person separated from a partnership. If you don’t have a credit card or haven’t ever borrowed money from a bank or mainstream financial institution, you may have absolutely no credit history.

According to Consumer Financial Protection Bureau (CFPB) research, 45 million Americans are known to be “credit invisible.” This describes people with shallow financial records or no credit records whatsoever. Credit invisible people don’t have a credit score with FICO or any of the three major credit bureaus. According to this worrying study, there are “credit deserts” all over the country, with this term used to describe neighborhoods where people lack access to mainstream borrowing opportunities.

Options for people with no credit history

If you have no credit history whatsoever, you may face difficulties accessing credit. However, while buying a home can prove extremely challenging, less expensive items like cars are very much possible. While you might have to think outside the box, there are loans out there and lenders willing to help.

From negotiations and cash sales to cosigners and community lenders, let’s look at the options available to people with no credit history:

Negotiate a better deal

It’s important to remember this – your ability to access credit is always based on the value of the loan. While this might seem obvious, one of the best ways to get the car of your dreams is to negotiate a better deal. Whether you’re making a private deal or buying from a commercial car yard, the art of negotiation is alive and well when buying and selling automobiles. Both the sticker price and the trade-in value may be up for negotiation, with a lower overall price making it much easier for you to access credit.

Improve your down payment

Along with lowering the price of the car, you can improve your chances of getting a loan by increasing the amount of your down payment. While this is not always possible, making a large down payment shows that you are serious about the deal. If you have a compromised credit history or no history whatsoever, remaining patient and saving for longer often makes sense. From a lender’s perspective, it’s simple – a significant down payment shows that you’re a safer bet to repay the loan.

Pay cash for the car

If you’re in a position to pay cash for a new car, you can avoid borrowing any money at all. Once again, this is not always possible, but it’s a great option to have. If you don’t think you fit into this category, you may be wrong. Perhaps you can purchase a cheaper car in order to make a cash sale possible. Maybe you can borrow money from friends or family members to get on the open road sooner. Paying cash is not just a good way to avoid the impacts of a non-existent credit score – it’s also a great way to save money on interest over the term of the loan.

Get a cosigner

If friends and family are unable to lend you cash, or you don’t want to ask, they can still play a role in you getting a car loan. Having a cosigner is a great way to reassure lenders. In fact, this is the ideal way to circumvent the entire credit history checking process because another person takes responsibility for your loan. While you are still required to make loan payments, the cosigner is on the hook if the payments stop coming through. Depending on the loan, the cosigner may also be responsible for late fees and collection costs, along with surrounding legal obligations.

While a cosigned loan will affect both of your credit reports and can help you to build credit history over time, the other person’s credit score takes precedence when it comes to approving the loan. The other person’s score is not the only factor analyzed by lenders, however, with their job and debt to income (DTI) ratio likely to be checked before an application is approved. Before going down this path, it’s important to consider the long-term implications of a cosigner arrangement, including potential financial and relationship challenges.

Take advantage of alternative credit data

As mentioned above, there are multiple credit records available in the United States. If your standard FICO score is non-existent or compromised in any way, you may be able to use alternative records to get accepted for a car loan. When traditional proof is unavailable, some lenders are willing to look at non-traditional sources. While similar credit scoring formulas are still used, there are multiple options on the table.

In an effort to improve credit options for low-income people, FICO recently introduced the UltraFICO score, which is based primarily on your banking activity. Experion created another alternative with Experian Boost, which takes things like your cellphone and utility payments into consideration. While not all lenders are willing to use these records, community-based credit unions and other non-bank institutions are often more flexible in their approach.

Find the right lender for your situation

When you’re trying to buy a car with no credit history, it’s important to find the right lender for your unique financial situation. There are lots of options out there, from commercial car vendors to mainstream banks and credit unions, and community-based financial cooperatives:

  • Commercial car vendors – Commercial car yards often have finance options, but they are limited and can be extremely expensive and risky. Sometimes known as “buy here, pay here” deals, these loans are generally aimed at people with bad credit or no credit history. While these in-house loans may seem enticing, sky-high interest rates and significant ongoing fees are very common.
  • Mainstream banks and credit unions – Traditional banks and credit unions can be great places to obtain finance, but they’re often compromised when it comes to flexibility. If you have no credit history, you may be unlikely to meet their strict requirements. While a cosigner can be used in many situations, as mentioned, there are drawbacks associated with this path.
  • Community-based financial cooperatives – Small credit unions and community banks are more flexible and often more lenient when it comes to loan approval. Some lenders even have specific programs for people with no credit history, and others are much more willing to look past your credit score. While they still need to check you out, things like employment history, banking records, and utility payments can be used to check your creditworthiness.

Practical steps involved with getting a new car

Once you have a solid grasp of credit scores and how they affect your lending options, it’s important to take some practical steps toward car ownership. The following checklist is a great place to start:

  • Determine how much you can afford.
  • Check your credit history.
  • Save for a 20% deposit or more.
  • Consider family and friends as a cosigner.
  • Compare potential lenders.
  • Gain pre-approval before you shop.
  • Shop around for the best deal.
  • Apply for a car loan.

The DCCU difference

If you’re looking to get a car loan but don’t have any credit history, DCCU is here to help. We offer fair car loan arrangements that are highly competitive with the major banks. Unlike unscrupulous car vendors, our entire service is based around your needs. As a community-based institution, we are 100% committed to the economic and social well-being of our members. Our service is based on honest advice, low fees, and great rates.

We help people from a range of socioeconomic backgrounds to access car loans and other lending products. DCCU is owned by our members, and our financial cooperative is dedicated to “building lifetime relationships through personalized financial service.” Along with easy loan access and great deals, we provide a number of extras for car loans, including extended warranty protections and simple loan pre-approval. This can be a great negotiating tool, with price certainty leading to more confidence, better decision-making, and more competitive deals.

At DCCU, our values are strong and our message is clear: We are “a local neighborhood Madison credit union that stands for you.” Along with car loans, we offer a number of other lending services across Madison and surrounding counties. If you have no credit history and would like to get a car loan, please contact DCCU today to learn more about our services.



What Is a Good APR on a Personal Loan?

What Is a Good APR on a Personal Loan

The process of taking out a personal loan can be overwhelming for many people. From worrying about whether your loan application will be approved to combing through the fine print and understanding loan terminology, the experience can be a daunting one.

Personal loans can be attached to some exciting and joyous periods in our lives (when we are seeking a loan for a wedding or a car loan for a new ride), or they can be linked to incredibly difficult times (when we need a cash advance to help with sudden and unexpected medical expenses, for example).

Whatever the reason that prompts you to apply for a loan, a basic understanding of how personal loans work can ease your mind in the process and help prepare you to choose the best possible loan for your circumstances.

That choice could be dictated by the loan with the best APR, which leads us to the question: “What is a good APR on a personal loan?” In order to answer that, we will start with a basic understanding of how APR works.

APR: What Is It and How Does it Work?

APR stands for “annual percentage rate,” referring to the interest rate and fees charged in conjunction with a loan, whether it is a cash loan or a loan of goods or assets (like an automobile). Most consumer loans use an APR rate, which does not compound interest.

Lenders are required to disclose APR to borrowers. This was a significant 20th-century initiative with the Truth in Lending Act in 1968, which was created to protect consumers.

Today’s loans are much more transparent than in the past; however, this does not mean some consumers are still unclear on how APR works or sign on to loans without researching all of the possibilities for securing a good interest rate.

APR can be calculated with these steps:

  • Add the total interest paid over the life of the loan with any loan fees
  • Divide that number by the amount of the loan
  • Then divide that number by the term of the loan expressed in the number of days
  • Multiply that number by 365 to generate an annual rate
  • Finally, multiply that number by 100 to turn it into a percentage

What is the Average APR on Personal Loans?

The major credit bureaus report 9.41% as the average interest rate on an APR loan rate on personal loans, with your credit score being the main driver in terms of how the lender calculates your percentage.

Consumers with a solid credit history can expect an APR of 15% or less, but those with a poor or nonexistent credit history could be faced with an APR as high as 60% or more.

Basically, the higher the risk you are as a borrower, the higher your APR will be on a personal loan. To ensure you are getting good credit card apr, be sure to keep the average credit card apr in mind and compare rates among lenders.

Woman In White Dress Shirt Wearing Eyeglasses

Factors That Affect Your APR

There are many factors that lenders place a heavy focus on when determining your APR. Your credit history, for example, is of great importance.

All lenders will look at your credit report to determine if you have good credit or bad credit. You may want to look into this yourself before looking to secure a loan, in case you need to take steps to improve your score.

There are also several other important factors you should be aware of before submitting a loan application.

Annual Income

Before a lender will agree to offer you a loan or establish the APR, they will want to review your income. In addition to assessing you by your credit score, the lender will consider whether your income will enable you to pay back the loan. You will need to provide proof of income with pay stubs or other documentation required by the lender.

Debt to Income Ratio

Even if your income is relatively high, it may be offset negatively in the lender’s assessment by a high amount of debt. Your debt-to-income ratio (DTI) is another way to predict your ability to repay a loan.

This figure is calculated by taking all of the debt payments you make each month (such as your mortgage loan, credit card debt, student loan, and auto loan payments) and then dividing the total of those bills by your gross monthly income.

A higher DTI will be a red flag for a lender—indicating you are already close to maxed out on debt and it is likely you would struggle to make the payments every billing cycle. A lower DTI is a promising sign for a lender, and in turn, it would help you secure a lower interest rate.

Loan Cosigner

If your credit and income history do not make you the best candidate for a personal loan, you may be able to improve your odds by adding a cosigner.

This may be a family member with better credit who is willing to sign on to the loan with you, and their willingness to assume responsibility for the debt could result in a lender lowering APR.

Person with Cash and Calculator App

How To Compare Personal Loans: Good APR and More

Before you sign on the dotted line, you should be sure you have compared loan options to find the one that works best for you.

The best APR you can get is indeed a priority, but there are also other factors you should compare. Use this checklist when assessing the personal loans before making your final decision:

APR: If your credit history is good, then a good APR will be under 20%, and excellent credit will be under 10%.

Loan Term: Go for the shortest term you can afford, which will lower your APR.

Monthly Payments: Be sure the monthly payment is an amount you can afford while keeping up with all of your other financial obligations.

Fees: This is where the fine print is incredibly important. Be sure you understand every fee that is attached to the loan, including things like penalties for an early payoff, any interest charge, or an annual fee. Ask the lender to review every fee in detail before you agree.

Discounts: Wherever possible, try to take advantage of discounts that could be available from lenders. For example, you might be eligible for better rates by using a bank or credit union where you already have a checking or savings account.


7 Car Loan Stages and 7 Reasons Why Dane County Credit Union Is the Perfect Auto Loan Partner

A reliable car is an important part of modern life. From work and school to medical appointments and shopping, a car offers a greater quality of life and freedom of movement. Purchasing a car can be expensive, however, with most people taking out loans from financial institutions. At Dane County Credit Union (DCCU), we offer competitive car loans to the residents of Madison, WI, and surrounding counties. Whether you want a brand-new car loan or a refinanced loan agreement, we are here to help.

If you’re thinking about taking out a car loan, it’s important to consider your options. Most car loans take a few years to pay back, so it’s important to get clear advice and make smart decisions from the outset. While repayments and interest charges are an unavoidable part of life, lending agreements can differ widely between providers. From interest rates and deposits to loan terms and conditions, DCCU offers accessible and affordable car loans to people from all walks of life.

7 stages to getting a new car loan

Before you get a car loan, it’s important to understand the steps involved. This process doesn’t have to be difficult, but there are some essential steps that need to be taken. Let’s review these steps in detail and show you why DCCU is the perfect partner for your next car loan.

1. Review vehicles and finances

Before you get a new car loan, it’s essential to review your financial situation. While you don’t need all the details during this early stage, you should have a basic idea of how much you can afford. Whether you’re buying your first car, upgrading a family car, or buying your dream car, the overall cost of the vehicle needs to align with your income and liability limits. Everyone has different financial resources and obligations, and a detailed review is needed for each person based on their stage of life.

When reviewing your finances, it’s important to consider your existing income and debts in relation to the cost of potential vehicles. What kind of car do you want? What kind of car can you afford? What is the difference, and how are you prepared to compromise? While this fact often gets ignored, it’s also important to think about the desired length of your loan. While everyone wants to buy the car of their dreams, you should be aiming to purchase a good car that you can afford for the entire term of the loan.

2. Check your credit score

Wherever you live in the United States, your ability to borrow money is based on your credit score. This number is reviewed by lenders during the loan application to check whether or not you’re a good candidate. There are three consumer credit reporting bureaus operating in America, with each one providing information used in the generation of your score. Equifax, Experian, and TransUnion provide the data. Another organization, Fair Isaac Corporation (FICO), has developed a proprietary algorithm that measures this data and scores borrowers numerically from 300 to 850.

Credit scores include the following categories:

  • 781-850: Super prime
  • 661-780: Prime
  • 601-660: Near prime
  • 500-600: Subprime
  • 300-499: Deep subprime


Credit scores are pretty easy to understand. The higher your score, the more likely you are to be approved for a car loan. It’s not just approval, however, with higher scores sometimes leading to lower interest rates and better lending conditions. When analyzing your credit score, the credit bureaus look at your outstanding debt, payment history, length of credit history, account age, and types of credit used. DCCU proudly works with the entire community, with our car loans available to people with healthy credit or compromised credit scores.

3. Estimate your repayments

Once you have a basic idea of what you want and what lenders are looking for, it’s important to dig down into the details. In order to estimate your ongoing costs, you need to have the purchase price, the intended loan term, and the interest rate available to you, among other variables. Loan repayments and potential savings can be calculated fairly easily with the following information:

  • Vehicle purchase price
  • Car loan amount
  • Initial deposit or trade-in amount
  • Loan term
  • Interest rate
  • Balloon repayment
  • Repayment frequency

All lenders use this data to identify good opportunities, and you can use it also to estimate your costs. There are many car loan calculators available on the internet, but the best advice is to speak directly with lenders. While the value of the car, the amount of the deposit, and the intended loan term may stay constant between providers, interest rates and loan conditions can vary widely.

4. Compare potential lenders

Once you have calculated monthly repayments, it’s fairly easy to compare loans based on costs alone. Comparing repayment amounts is not enough in isolation, however, with other factors also relevant to your decision. For example, some lenders have more stringent lending criteria, and they may not be open to people with low credit scores. Other lenders may have lots of additional costs, hidden fees and charges, or fixed loan terms that lack flexibility over time.

It’s also important to note the difference between loans and lenders. Comparing dry data and isolated car loans is not the same as comparing financial institutions, with some lenders offering a very different quality of service. At DCCU, we operate an inclusive lending service that caters to a diverse range of people from broad socioeconomic backgrounds. We offer competitive interest rates, flexible lending conditions, simple refinance loans, and friendly customer service from a team that really cares.

5. Obtain pre-qualification

Before you start shopping for a new car or applying for a loan, pre-qualification is advised. This process offers theoretical loan approval and a working loan sum limit. In order to become pre-qualified, the lender will look at your credit score, your financial information, and the type and cost of the vehicle. While pre-qualification is not a guarantee of approval, it provides you with a rough idea of what you can achieve.


With car loan pre-approval from DCCU, you’ll know exactly how much you have to spend before you go car shopping. Not only will this help you to avoid making poor decisions, but it can also be a great bargaining tool at the dealership. There is little downside to pre-approval, with this process treated as a soft inquiry that does not impact your credit score. While pre-approval does not require comprehensive paperwork, it is a good excuse to get your documents in order early in the process.

6. Balance short-term and long-term gains

Before you make a final decision about your car loan, it’s important to think long and hard about all the financial implications. As one of your biggest assets and most significant ongoing expenses, your car loan is likely to represent a major factor in your monthly budget. The key to making good borrowing decisions is to be aware of the trade-off between short-term gains with long-term financial health.

The following factors need to be considered with every loan:

  • Interest rates: This is the cost of borrowing money, with lower rates associated with lower interest payments over time. There are two basic rate structures: fixed interest rates and variable interest rates. Most car loans are fixed, which means the rate amount is locked in for the term of the loan.
  • Loan term: This is the agreed time period needed to pay back the loan. The loan term is dependent on the purchase price of the car, the deposit amount, the interest rate, and the repayment amount. The shorter the term of the loan, the less money is paid back in interest. The longer the term of the loan, the smaller your repayments will be.
  • Loan fees: Additional costs may include repayment penalties, late payment penalties, application fees, and annual fees. If you are refinancing an existing loan, there may also be a designated refinance fee. Some car loan fees are hidden in the fine print, so you should always do your homework.
  • Loan conditions: Along with interest rates, the loan term, and the lending fees and costs, there may be other conditions associated with a car loan. Examples vary widely between loans, and they may include things like balloon payments, personal guarantees, and co-signer agreements.

Once you understand the basic components of a car loan, you can find a loan that meets your immediate and long-term needs. As mentioned, there is often a pay-off between short-term gains and long-term pain. For example, if you want to improve your weekly cash flow by lowering your monthly repayments, you will lengthen your loan term and end up paying more in interest payments over time. The opposite situation also exists, with shorter loan spans leading to more expensive monthly repayments.

7. Apply for a new car loan

When you’re ready to apply for a car loan, it’s best to be prepared. You will need documents to prove your identification, social security number, personal address, proof of income, and auto insurance. In addition, tax documents, payslips, income statements, and bank transaction details can also play a role. If you are applying for a refinanced loan, detailed information on the car and current loan agreement will also be required, including the vehicle identification number and current loan balance.

7 Reasons Why DCCU Is the Perfect Car Loan Partner

At DCCU, we make it easy to apply for a new car loan. We offer friendly, honest advice during the application process and reliable customer support throughout the loan period. A credit union car loan offers numerous advantages over a bank loan, including better rates, improved conditions, and community-based support. If you’re looking for the best place to get a car loan, you’ve come to the right place.

Here are seven reasons why Dane County Credit Union is the perfect car loan partner:

  1. Friendly, honest advice: We love helping local people find valuable financial solutions. We offer car loans at great rates, including low credit score options and competitive refinancing opportunities.
  2. Save money every month: Credit union car loan rates are highly competitive, especially for people with a low deposit or compromised credit score. When you pay less in interest, you save lots of money over the term of your loan.

  1. Tailored and flexible loan terms: Rather than a one-size-fits-all approach, we offer tailored loan terms based on your financial situation. You can change your term over time as your financial situation changes.
  2. Extended warranty protection: Our lending process helps you secure your vehicle with an extended warranty. If you want extra protection and reliable customer support, DCCU is a good place to get a car loan.
  3. Up to 100% finance: We try to make the car loan process as simple as possible. You don’t even need to save for a deposit, with our car loans providing up to 100% finance in many situations.
  4. Vehicle refinance loans: If you have an existing car loan and want to make changes, we are here to help. Car loan refinancing can be a great way to access better interest rates and improved loan conditions.
  5. Owned and operated by the community: As a member-owned financial institution, we are not driven by greed or profit. At DCCU, our services are based around your needs.

About DCCU

At DCCU, we offer car loans and other financial services to the residents of Madison, WI and surrounding counties. We are committed to improving the economic and social well-being of our members, and we are happy to help people from a range of socioeconomic backgrounds. We are proud to provide low and moderate-income members with car loan opportunities. Having a reliable car is an essential aspect of modern life, with our financial products helping people just like you to access a better quality of life.

At DCCU, our member-owned financial cooperative helps “build lifetime relationships through personalized financial service.” As a not-for-profit credit union owned and operated by its members, we are here for you. If you would like to refinance your car loan or learn more about our services, please contact DCCU today.


How Do Car Loans Work? Four Things You Need to Know

Man Driving Car

If you are in the fortunate position of having enough cash on hand to pay for a car outright, this is not the “how-to” guide you need. However, that would also mean your financial good fortune places you in a relatively small group, as approximately 85% of new passenger vehicles are financed.

Car loans are a reality for most Americans at some point in their lives, and have quickly become as common as a student loan or personal loan. Whether it means the purchase of a first car, an upgrade to a larger vehicle when starting a family, or even buying a car for a teenage driver, auto financing has become a part of everyday life.

Because car loans are as likely for most of us as paying rent or a mortgage, filing a tax return, and buying groceries to feed our families, we should all know the basics before entering into such a loan.

A little bit of car loan education goes a long way, preparing us for what lies ahead when we set out on four wheels of our own.

Black Super Car

The Four Things You Need to Know About Car Loans

Understanding how auto loans work means understanding these four components and how they work:

  • Down payments
  • Interest Rates
  • Loan Terms
  • Titles

We will familiarize you with these terms so you know the lingo well before you walk through the dealership doors and also so you can prepare yourself to make the best decision about a car loan.

Car Loan Down Payments

A car loan is an agreement between you (the borrower) and a lending institution/financial institution (the lender) to give you the funds needed to purchase a new auto.

Once you find a financing option that works for you, you’ll settle upon an agreement you will pay the loan back in monthly installments, by a specific date, with interest added.

An influencing factor from the lender’s perspective in the amount of the loan and the required payments and interest rates is how much you may be able to offer in a down payment. In other words, if you have only $500 as a down payment, your loan will be less attractive than if you had $5,000 to put down.

Many people rush into car financing and go in with very little for a down payment. If you are in a position to wait and save more money, that down payment can really help you in the long run, allowing you to pay more upfront and rack up less interest on your auto loan and a smaller car payment over time.

For a long time, the number most associated with down payments was 20%, meaning consumers were advised to put down 20% of the car’s overall price as a down payment.

However, as auto prices have increased, this number has become an impossibility for many. Still, putting down 10 or 15% if possible will help you reduce the monthly payments and secure a better interest rate.


Car Loan Interest Rates

If you have ever heard anyone say in a warmer climate “it’s not the heat that will get you, it’s the humidity,” the same concept could be applied to car loan interest rates.

It’s not the sale price of the car that will get you, it’s the interest rate.

To be fair, if the sale price of the car is six figures and you are a college student with a part-time job at a frozen yogurt café, then the sale price will get you, too!

However, the main point here is that a high interest loan over time can really hurt you financially, especially if unexpected circumstances make it difficult for you to make your monthly payments.

Walking into a car dealership as a car buyer means you need to be aware of what you’re getting into when it comes to dealer financing.

Interest rates are how lenders make money, and it is down to the consumer to understand what factors go into determining this rate so that the lenders are not making windfall profits off of your inexperience.

The interest rate on your car loan will be set by the lender after reviewing

  •  Your credit score and history
  • The term of your loan
  • Your down payment
  • The value of vehicle you are purchasing

If you know going into a car loan that at least one of these areas will reflect poorly on you, it helps to bump up your efforts in another. For example, if your credit score was dinged by some financial hardships, you should consider how this will affect your rate.

Bad credit sometimes can’t be helped- it’s best to get a credit report to look at your credit history to get an idea of where you stand. With a lack of excellent credit, perhaps try to save until you can make a down payment of more than 20%.

Car Loan Terms

The loan term of the loan refers to an agreed period of time for you to make your loan payment each month to repay the debt in full. In the case of car loans, the term is usually between 36 and 72 months to pay off your principal balance.

Simple math will tell you the shorter the team, the higher the monthly payment, and vice versa. One thing to bear in mind is while a lower monthly payment probably seems tempting, a longer-term also means you are paying more in interest.

When entering a loan application, car buyers should choose the shortest possible term they can afford in order to avoid overpaying with a higher interest rate.

Women Relaxing in Car

Car Loans and Titles

A final piece of the car loan puzzle borrowers should consider is how the auto title works in conjunction with the money you borrowed. Even though you are the “owner” (as in primary driver) of the vehicle, the lender retains the title until your debt is paid in full. This means the lender can take the car back if you default on the loan.

Once a car loan is paid in full, the title will be transferred to you.

Final Thoughts on Car Loans

By going into the car buying process with a clear idea of the down payment you can afford as well as understanding the terms and interest rates offered, you will be in a better position to negotiate a fair and favorable loan.