Lower Interest Loans

Auto Loans
(Financing) (Interest Rates) (Applying)

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Getting a loan for either a used or new car is similar process. In both cases the car is considered collateral for the loan. If you default on the loan, the car can be repossessed.

Interest rates on used car loans can vary considerably, and the rates can fluctuate based on the amount requested and your credit rating. A poor credit score usually means that the interest rate charged will be higher. So, it pays to shop around for the best rate.

Being approved for a used car loan before you shop can be helpful in negotiating a better deal. Finding out how much your loan is approved for helps you determine what you can afford. You'll also in a better position to make an offer and complete the transaction when you find the car that is right for you.

Financing:

Once you have chosen your car at a dealership, unless you are able to pay cash for the car, you will be asked how you want to finance the car. You can arrange financing in several ways. You can apply for a loan through the dealer, go online to obtain a loan, or go to a bank or financial institution and apply for a car loan.

Most dealerships have their own finance companies which make it easy to apply for loans at night or on weekends when other financial institutions are closed. Sometimes dealerships also have special rebates and other programs that you may want to consider. You may have seen ads for zero percent (or very low) financing on auto loans. Obtaining this kind of interest rates usually requires that you have an excellent credit rating. If your credit isn't top notch, you'll likely find yourself being offered a higher interest rate. The credit required for a zero percent financing loan varies from one automaker to another because they may use different financing companies.

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You can also obtain an auto loan online. This is known as direct financing. By getting a loan without using a dealer you may have more negotiating leverage when purchasing your car because you will know how much you have to work with. Getting a loan in advance can speed up the sales process too. Online lenders often have less overhead or make a lower profit on their loans so their interest rates may be more attractive than those offered at a dealership.

You can always go to banks or other more traditional lending institutions to obtain financing too.

Interest Rates:

No matter where you get your auto loan, the interest rate charged depends on your credit. If your credit rating is excellent you may qualify for competitive interest rates. If not, you may be charged a higher interest rate because of the higher risk in lending you money. The term of an auto loan is usually from three to five years. The longer you take to pay off the loan, the lower the monthly payments are.

Loan Applications:

As with any type of loan you must provide the lender with personal information that helps determine your ability and willingness to pay back the loan. Every lender has their own internal score card to evaluate your credit, but basically the same type of information is required on all applications.

Work history is important. Your ability to pay is determined by your employment history...how much you earn, how long you have worked for your current employer or at least how long you've been in the same field. The longer you have been in one situation the more stability you have.

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You have to be able to make your monthly payments and you'll have to list what your current financial obligations are, for example, mortgage payments or rent, credit card payments, other loans or debts.

Lenders also consider your willingness to pay. This is determined by your credit history. Most lenders will do a credit check on you to determine what your payment habits are like. If you have always met your obligations, the chances are you will continue to do so. If not, you will be seen as a credit risk.

Once you have established the car you want and the price you want to pay, review the interest rates and charges from various lenders and choose the one the best fits your budget and your needs.