Auto Loans

Most consumers acquire an auto loan whenever they buy a car, be it new or used. To limit the overall cost of a vehicle purchase, it is essential to shop around for the best deal for the car and for the car loan.

Auto loans come with a variety of interest rates, typically contingent upon the consumer's credit history. Consumers should know what their credit score is so they  Read More...

Auto Loans

(Continued) can negotiate the best deal.

What kind of Auto Loans Are There?

Auto loans are generally offered with short terms of three, four, or five years. The longer the term, the more interest the consumer will pay, and the smaller the payments will be. Conversely, the shorter the term, the smaller the amount of interest the consumer will pay, and the larger the payments will be.

Often the car dealer may ask what you can afford as a monthly payment. It is best to give them a range, rather than an actual figure. If you narrow it down too much, they have no incentive to look for a better loan for you. Take the time to read the fine print and ask for all fees involved to know what it is that you are getting into.

What Do I Need To Get an Auto Loan?

Whether you are financing a new or a used car, it requires a simple credit check on the borrower along with proof of identification and employment. Used car loans may be easier to acquire than new cars loans, for the simple fact that less money is being financed. In fact, consumers with a bad credit history may find it easier to acquire an auto loan for a used car.

Consumers can look for an auto loan at the dealership where they are making their purchase, an online lender, a bank, or a lender's office. Shopping around and using an outside source cuts out the middleman, can save the consumer money, and can give the consumer the upper hand.

Incentives and Interest

However, car dealerships often offer incentives to purchase a vehicle from them, which usually involves either a cash rebate or lower interest rate on your auto loan. Double up and accept the rebate from the car manufacturer while taking out an auto loan outside of the dealership, provided the terms are agreeable.

The best interest rates are typically only available to consumers who have good credit scores. If your credit history is a bit shaky, then you may need to pay higher interest on your loan.

Consumers need to evaluate their options, not only by comparing interest rates, but also, by comparing APRs, which give the yearly cost of the loan. Many online sites offer the use of a financial calculator that does the comparison for the consumer.

Can I Refinance My Auto Loan?

Refinancing your auto loan is similar to refinancing a home, but it does not involve an appraisal of the car. It is based on how much you owe. The consumer simply borrows the amount needed to pay off the initial auto loan.

The new loan should have a lower interest rate, and therefore, the payments should be lower. Lower payments mean more disposal cash to put towards paying off the auto loan early, lowering credit card debt, or for miscellaneous purchases. When consumers refinance, they should look for an interest rate that is at least 1 % less than their current interest rate.

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