When most people are shopping for a new car, they need financing to buy it. They can apply for a loan through a bank, credit union, online lender or at the dealership where they’re buying their car. Most lenders require a credit report before making a lending decision. They look at an applicant’s credit history, which includes all past loans and debts (money owed). A low score may keep a person from getting approved for a loan, or cause them to pay more than they should in interest charges.
Different lenders may offer different Car Loan terms, including a monthly payment amount and interest rate. It’s important to shop around and compare terms so you can find the best deal.
A car loan is secured by a lien on the vehicle’s title, which means that the vehicle can be taken away from the borrower if they don’t make payments. Typically, a secure loan has a lower interest rate than an unsecured one. It’s also important to consider the length of your loan term. A longer loan will cause you to pay more in interest charges. If possible, choose the shortest term that fits into your budget.
Some lenders have special car loan programs for buyers with a specific type of credit or financial situation. Those programs might include a co-signer, where someone with good credit agrees to be responsible for the loan in case you are unable to repay it. Having a co-signer on your loan can increase your chances of approval and help you get the best car finance rates.
Many people use a dealer for their auto loan because the dealer does everything from providing the car to lending the money. However, it’s usually a better idea to use a direct lender instead of the dealer. Whether it’s a bank, credit union or an online lender, they can often offer better car loan terms than a dealership.
It’s also a good idea to ask the dealer about manufacturer incentives. Those could be discounts on the car you’re interested in or cash back. However, be sure to get all of the details in writing before you sign anything. You should also be wary of add-ons, which are extras that the dealer might try to sell you. These can include gap policies, paint protection plans and extended warranties. It’s a good idea to ask the dealer to list the price of any add-ons, as they aren’t always free.