If you are thinking about buying a used car, you will have the opportunity to save money on the purchase, but you may still need financing. However, before you rush to a dealership and apply for the first loan you find, it is a good idea to do some planning and research first. Here are some ways to be smart about applying for used car financing.

Know Your Credit Rating Beforehand

One of the first things you should do before you apply for any type of loan, including a used car loan, is figure out what your credit rating is. This includes requesting a copy of your credit report and getting your most recent score. The credit report lists information such as collections, public records and other information that pertains to your credit score. The score is what lenders use when determining if you are approved and what your interest rate will be.

When you get your credit report, look through it thoroughly to be sure it is accurate. If you find any information that doesn't look familiar, contact the credit bureau to get more information. It is possible that someone used your name for a line of credit, which would be fraud and should not be held against you. With this report, you will also be able to explain any collections to the lender, which helps when you think you are at risk of being denied the loan.

Provide Solid Proof of Income

The next thing the lender wants to see is that you have the ability to make the car payments. They want to know where you work, what you do and about how much you earn. The lender is going to ask for your employment information and proof of your income, often through a combination of paystubs and bank account statements. Keep in mind that if you have a relatively new job, you should probably work a few more months before applying for the used car financing. Some lenders have strict requirements with how long you need to be at your job before approving you to be sure it is going to be a long-term, stable job.

Keep the Length of the Loan Minimal

While it can seem tempting to get a longer loan term so you have lower monthly payments, this isn't always a good idea. In some cases, you actually get a better interest rate when you choose a shorter loan, which also helps to lower the monthly payments. Consider how much you can comfortably pay each month for the car loan, and find out what the interest rate versus the payments would be for each length of time. You might just find it worth it to lower the length, therefore helping you pay the car off faster.

As with all car loans, also be prepared to provide a down payment and have references. You might need a co-signer if your credit is less than perfect.