The 7 Best Auto Loan Companies in America

New cars at sunlit dealer showroom close view.

It can be incredibly difficult to have the cash on you to purchase a new car when you need it. My poor car has seemingly been on its last leg for a while now. I think the only reason it is still kicking is that it is as stubborn as I am, and I happen to be grateful for that. At this moment, there is simply no way I can just pay for a car outright so I’ve been having auto loan companies on my mind.

For those with the same struggle, know that you are not alone. I know that does not really solve the problem, but it’s still nice to know. And, anyway, the fact that so many people need help purchasing a vehicle is the reason that there are so many auto loan companies available to help us out.

With so many options, it may seem impossible to choose the right one, but it’s not. We are going to talk about seven of the best auto loan companies in America so you can narrow down your choices.

7 of the Best Auto Loan Companies in America

There are many good lenders in this country, but here are seven great ones to start with:

1. 5K Funds

5K Funds has a network of more than 100 auto lenders and offers a very simple, fast, and secure online process. The initial application can take as little as 90 seconds. If approved, you get access to the funds pretty quickly.

Unfortunately, you might also have to repay the loan very quickly. Terms do go up to 72 months, but depending on your loan amount and other factors, you could have a repayment term of only two months. All of this is stated prior to accepting any loan offer, so you have the opportunity to turn down a loan with unfavorable terms.

5K Funds is one of the auto loan companies with relaxed qualifications. There is no specified minimum monthly or annual income. They are more concerned with you having a steady income. There is also no minimum credit score requirements. In fact, other than a steady income, their only stated requirements are that you are at least 18, be a U.S. citizen, and have a valid bank account.

Pros:

  • Very quick application and approval process
  • Quick access to fund after approval
  • The complete and secure online process
  • No fees

Cons:

  • Maximum loan of $35,000
  • Some short repayment terms

2. CarsDirect

CarsDirect is a great company that can help people from all financial walks, including those that have bankruptcies, bad credit, and even no credit. You can use these loans for both new and used cars as well as refinancing current auto loans.

CarsDirect is an auto finance broker that can link you to both financing and cars in one place. With a large network of thousands of lenders, they have the ability to help pretty much anyone who is at least 18, both reside in and is a citizen of the U.S., and makes at least $18,000 a year.

CarsDirect does not specify a minimum credit score. Instead, they work with all types of credit. However, the interest, length of repayment, and the need for a down payment will depend on your credit and income. CarsDirect can be excellent for those with poor or fair credit who need a car and want to build their credit.

Pros:

  • Find car and loan in one place
  • Accepts bad credit
  • Prequalification and fast application
  • No fees

Cons:

  • The potential need for a down payment
  • Broker- not a direct lender

3. Monevo

Monevo is one of the auto loan companies that is a broker as opposed to a direct lender. They have a network of more than 30 lenders and you can easily apply for and compare loans on their website. You can also prequalify so there is not a hard credit hit until you choose one of the auto loan companies to go further into the application process with.

There are very few set requirements: You must be 18 or older and a U.S. citizen or legal resident to apply. They also require that you have a valid bank account under your name. Any additional requirements would come through the individual auto loan companies in their network.

You can apply for loans up to $100,000 with terms all the way up to 12 years. The interest rates start very low at 3.49 percent but they can get high depending on your credit.

Pros:

  • Soft credit hit first
  • Works with all credit types
  • Repayment terms up to 12 years
  • Borrow up to $100,000

Cons:

  • Fairly new to the U.S.
  • Smaller network than some other auto loan companies

4. Auto Credit Express

Auto Credit Express is connected with more than 1,200 auto loan companies that work with good credit, bad credit, and bankruptcies- even open bankruptcies in some cases. They do require that you make at least $1,500 per month before taxes, are 18 or older, are a citizen or legal resident of either U.S. or Canada, and have a valid phone number.

The auto loan companies connected to Auto Credit Express offer a wide range of loan amounts, most of which fall between $1,000 and $35,000. Interest rates for those with good credit can be as low as 3.99 percent. Bad credit scores could lead you to pay up to 29.99 percent. Repayment terms vary widely among the auto loan companies in the network.

Along with lenders, Auto Credit Express also has a network of dealerships. You can only use their loans for those dealerships, so if there is a car outside of that network you want, you will need to apply elsewhere. Some credit types and loans do require a down payment, but they tend to be very reasonable.

Pros:

  • Great for all credit
  • Works with even open bankruptcies
  • The network of over 1,200 auto loan companies and auto dealerships

Cons:

  • Can only purchase through a partner dealership
  • Might require down payment

5. Capital One Auto Finance

Capital One is pretty well known for being open to those with less than perfect credit. Their auto loans are no different. Even those with a score as low as 500 have a chance of being approved if they meet the income and citizenship requirements. Interest starts very low at only 3.59 percent, but lower credit scores do move closer to 24.99 percent. Capital One auto loans typically range from $1,000 to $35,000, and you can get up to 84 months to repay the loan.

While Capital One does supply direct loans, you still cannot shop just anywhere for your car. It has to be purchased through one of their partner dealerships. Not to worry, though. They have more than 12,000 dealerships they work with, so you are bound to find the car you need and want.

They do have other rules about the vehicles, such as they cannot have been manufactured before 2009 and they must have less than 120,000 miles. Some vehicle types, such as Oldsmobiles, Suzukis, and Saabs, do not qualify either. Capital One offers auto loans all over the U.S. except for Hawaii and Alaska.

Pros:

  • Provides an auto search tool
  • 12,000 partner dealerships
  • Up to 84 months for repayment

Cons:

  • Not available in Hawaii or Alaska
  • Can only shop with their partners
  • Rules about the vehicles you choose

6. Lending Tree

Lending Tree is a popular organization with a large network of auto loan companies. With such a network, Lending Tree does not state any specific requirements because they vary so greatly. Both the minimum credit score and minimum income requirements depend on which of the auto loan companies you choose through them.

These variations can be positive for many people, but it can still be a bit frustrating, too. The standard requirements, though, are that you must have a valid bank account, a stable income, be 18 or older, and be a U.S. citizen or permanent resident.

Lending Tree is connected with auto lenders that offer loans up to $300,000, and you can get up to 72 months to repay the loan. Interest rates start as low as 2.99 percent and often top out around 4.44 percent, though your income and credit score may affect this amount. You can use the loan for new and used cars as well as refinancing and lease buyouts.

Pros:

  • New and used cars
  • Refinancing and lease buyout
  • Up to 72 months to repay
  • The large network of lenders
  • No minimum credit score

Cons:

  • Terms vary between lenders
  • Hard credit hit

7. Car.Loan.com

Car.Loan.com is another auto broker that can link you up with several auto loan companies. There are loans for good credit, bad credit, and no credit as well as a history of bankruptcy. There is no minimum credit score, but they do want you to have at least $1,500 per month. You are also required to have at least five personal references, three years of job history with 6 months at your current job, and a valid phone number.

Car.Loan.com has access to loans ranging from $1,000 up to $45,000. Interest rates start as low as 7.99 percent but- like all other auto loan companies- your interest will depend on your credit score. Repayment terms go all the way up to 84 months for qualifying loans. The only real downside is that the process is not completely online. An agent will contact you to finish up the application. This kind of takes away the convenience factor, but it is still a good option to consider.

Pros:

  • Up to 84 months to repay
  • Fast approval process
  • Works with all credit types
  • Low interest for good credit

Cons:

  • Some dealings with an agent
  • Interest can get high

Before You Apply

You really need to make a plan before you apply to any of these auto loan companies. Your plan will help you choose the best auto loan and lender for you.

Granted, that down payment may be a bit steep for some people with low income and little time to save, but you should still try to have a good down payment to minimize what you need to borrow. Here is a calculator to help you determine how much you can actually afford.

You should also determine how long you will need to pay off your debt. Most lenders offer repayment terms from a few months to several years. Experts suggest keeping it around 60 months, or five years.

However, you might need to keep it much lower than that. Are you expecting any major life changes or any negative impact on your income before those five years are up? Do you have a baby on the way or is one of your kiddos heading off to school? Will you be taking a year off to help take care of your aging mother or even taking some time off due to an operation you will be having? If the answer is yes, you might not want to commit to a five-year repayment plan.

The more you can decide beforehand, the easier it will be to narrow down your options. Also, if you have not yet picked out a car or dealer, don’t do it. Your best loan offer may come from a lender that requires you to purchase specific cars from specific places. It is okay to window shop and to get an idea of what you are looking for, but try not to settle yourself on any one single vehicle until you know the rules of engagement.

Conclusion

Paying out of pocket is most certainly not the only way to buy a vehicle. Even better, you do not have to have a perfect credit score, a perfect job, and a perfect down payment, either. There are auto loan companies out there who work with just about anyone, any income, and any credit. You just have to look for them.

We provided you seven awesome auto loan companies to check into, but by all means, look into as many as you need to in order to be comfortable with the company you choose. Shop around as much as you can, receive as many prequalifications as you can to more thoroughly compare your options, and take the time to think each of your options through carefully before making a final decision.

The 7 Top Auto Loan Companies for Bad Credit Revealed

Having bad credit has a way of preventing you from getting the things you need. But it does not stop you from needing those things. Two major ways bad credit can get in the way is when you need to buy a car or want to buy a house. Fortunately, there are auto loan companies available that help those with bad credit.

Auto Loan Companies for Bad Credit

We took a look at what is available and compiled this list of seven of the best auto loans for bad credit online. This is by no means an exhaustive list, so if none of these suit your needs, do some more research. These are, however, seven great auto loan companies to start your search with and find a car loan with bad credit.

#1 Capital One

Capital One is one of the auto loan companies that lets you pre-qualify for a loan. This means that you can see if- according to the information you provide- they will approve you for a loan without a hard hit to your credit.

If you choose to use Capital One, they will need to do a full credit check. But they do not require it at the beginning of the process. Your pre-qualification is valid for a full 30 days. Pre-qualifying does not guarantee a loan or the quoted interest rate. All of the terms and rates will be decided upon the final approval of the loan.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,500 - $1,800
  • Minimum Loan Amount: $4,000
  • Interest Range: 3.59% and up

There are some restrictions to keep in mind:

  • Capital One does not provide loans in Alaska or Hawaii. So if you live in either one, you will need to look for alternative financing.
  • The car you purchase must not be older than 12 years. Though, in some states, 10 years is the maximum. They also do not want the car to have more than 120,000 miles- the fewer, the better.
  • Some makes and models do not qualify. If you already have a car in mind, make sure that Capital One financing will cover that particular one before you get too deep in the process.

#2 Rate Genius

Rate Genius is another auto loan broker that helps those with low credit. People with scores of as low as 550 can be approved if they meet the other requirements. However, you can expect a pretty high-interest rate for a low credit score.

There is a pretty fast preapproval time, sometimes in as little as two hours. But there is a hard credit inquiry. Rate Genius will send your application to up to three lenders if you are denied by the first option. The car you choose cannot be older than seven years or have more than 100,000 miles on it.

As it is an auto loan broker, it does not specify any vehicle restrictions, though the lenders it works with may have their own. Rate Genius financing is available everywhere in the U.S.

  • Minimum Required Credit Score: 550
  • Minimum Income: $2,000
  • Minimum Loan Amount: $10,000
  • Interest Range: 3.49% - 25.87%

#3 My Auto Loan

My Auto Loan is a broker who works with several auto loan companies to provide its applicant with several loan options. The company works with applicants who have credit scores as low as 500, but you must make at least $1,800 per month. You can expect a hard credit inquiry.

My Auto Loan only approves cars that are less than 10 years old and have less than 125,000 miles. Additional vehicle restrictions may come through different lenders. My Auto Loan is available in all states except for Alaska and Hawaii.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,800
  • Minimum Loan Amount: $8,000
  • Interest Range: 2.74% - 27%

#4 LendingClub

LendingClub is one of the auto loan companies that provide both peer-to-peer lending and direct lending, increasing your available options. It allows you to view and compare two loans at a time without a hard credit pull. Though, it does require a hard inquiry if you officially apply.

While they only require a credit score of 510 to qualify, you can expect your interest to be high if you have bad credit. Also, for those with scores less than 630, you might find yourself needing to meet additional requirements.

  • Minimum Required Credit Score: 510
  • Minimum Income: No minimum
  • Minimum Loan Amount: $5,000
  • Interest Range: 3.99% - 24.99%

LendingClub is only available in 35 states. So double-check that yours is one of them prior to applying. Additionally, the car cannot be older than 9 years or have more than 110,000 miles if your credit score is under 630. Those numbers increase to 10 years and 120,000 miles if your score is higher.

One of the biggest benefits of using LendingClub is that you can extend your loan term by refinancing with them. This is extremely helpful for those who find it difficult to make their current payments. You can often get it extended up to 12 months. However, your current loan has to have been opened for a minimum of 30 days. And you must have at least 24 months left on your current loan term.

#5 Springboard Auto

Springboard Auto is one of the direct auto loan companies that work with bad credit. You only need a credit score of 500. But they do require that you have a minimum monthly income of $2,000, which is the highest on this list.

They also require you to get at least a $7,500 loan. You must have at least four accounts on your credit history. And you can expect origination fees of almost $600.

  • Minimum Required Credit Score: 500
  • Minimum Income: $2,000
  • Minimum Loan Amount: $7,500
  • Interest Range: 5.00% and up

The car can be no older than 10 years and have no more than 138,000 miles on it. Additionally, there is no financing available for electric cars, some trucks, and a few other types. Financing through Springboard Auto is only available in 33 states. While the requirements are a little more stringent for this lender, it is a great option for those who have bad credit yet still have a decent income.

#6 OpenRoad Lending

OpenRoad Lending is a loan broker that works with traditional financial institutions and other auto loan companies to find their applicants the best possible loan. While OpenRoad Lending itself does not do a hard credit pull prior to an official application, some of the lenders in its network might.

It is open to all borrowers with a credit score higher than 500. But it is important to remember that the lower the credit score, the higher the interest rate.

The minimum loan they approve is $10,000, which is a bit steep for some people. However, most used cars come close to $10,000 at a minimum. So whether this loan amount is good or bad really depends on the total of your car.

  • Minimum Required Credit Score: 500
  • Minimum Income: $1,500
  • Minimum Loan Amount: $10,000
  • Interest Range: 2.90% - 24.90%

It only approves cars that are less than 10 years old with no more than 140,000 miles. But some makes and models are not approved regardless of age and mileage. These include smart cars, Oldsmobile, and a few others. So be sure to check if your car is on that list. OpenRoad Lending is only available in 40 states, so be sure to check for your state as well.

#7 Carvana

Carvana is a bit different from most other auto loan companies as it only finances cars that it sells. This can be beneficial in some ways, but it also limits you to those cars. If you have already found the car you want or Carvana does not offer what you are looking for, you will need to find another lender.

On the upside, it simplifies the process a bit. You can do your car shopping and your finance applications all in one place, saving you hours or days of time. Even better, there is no need to negotiate the price.

  • Minimum Required Credit Score: None
  • Minimum Income: $10,000 per year
  • Minimum Loan Amount: $4,000
  • Interest Range: 3.90%

There is no minimum credit score required. Though the APR will depend on your credit. Carvana will do a soft credit check so you can check rates and terms before officially applying. You must make at least $10,000 each year to qualify or currently be in bankruptcy.

You might be concerned about purchasing a car online, which is understandable. But there are some things that might ease your mind. First of all, the car goes through an extensive 150 point inspection and even includes a CarFax report. So you can view the history of it as well as a 100-day warranty. Second, they actually deliver the vehicle to you, in most cases free of charge, or reimburse your airfare if you fly to get the car.

Also, Carvana has a return policy. You have seven days after receiving the vehicle to test it out and decide if it is right for you. If it is not, Carvana will refund any money you put down on the car and cancel out the loan before a payment is even due.

What to Know Before You Apply

Before we jump into the loans and companies, let’s talk a little about what to expect in the process. Auto loan companies vary in many ways, but there are some general things to know before filling out any applications.

Credit Hit

Here is something important for you to know: When you apply for credit, your credit score takes a hit. You can get preapprovals from many auto loan companies, though. These are soft hits, meaning they do not really impact your credit score.

Play it smart- get as many preapprovals as you can before officially applying. Once you have some companies that have preapproved you, put in all of the official applications within two weeks. These steps will help minimize the impact on your credit.

Income

Most auto loan companies require a somewhat stable income. While not all lenders specify, a good rule to go by is to be sure you have worked for the same company for at least six months. Many want to see an ongoing income for the past three years.

Each lender will have its own requirements concerning the minimum amount of income you need. With bad credit auto financing, you usually need at least $1,500 of monthly income. Some lenders require more. In short, the better your income and the length of time you have had it, the better chance you have with financing.

Loan Amount

Some auto loan companies have minimum loan amounts that you must apply for. Be sure that you know what these are before signing a contract. You do not want to borrow more than you need or can afford.

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Interest Rates

It is simply a fact that if you have bad credit and get approved for a loan, your interest rate is going to be higher than that of someone who has good credit. This is because those with bad credit are considered risky, and a higher interest rate is intended to offset that risk.

Unfortunately, those interest rates can get pretty high- some up to almost 30 percent. That is $300 in interest for every $1,000 you borrow.

If your credit is really low, you should try to hold off a little while on getting an auto loan. I understand that desperate times call for desperate measures, so if you can’t hold off, I get it.

If you do no absolutely have to have that car right now, try to wait until you improve your credit some. The best way to improve your credit is to pay off what is on it. You may not be able to pay it all off right now, but try to pay off a couple of things- even getting just one thing off can improve that score.

Call your creditor and see if they will settle for a lower amount. They will often agree to this, meaning that you can pay that debt off more quickly. If you can do this before applying for a loan, you have a chance to get a lower interest rate.

Steps to Take Before Applying

There are some steps to take before you apply for an auto loan with any auto loan companies to increase your chances of success and speed the process up a little.

You should always know your credit score before you apply for any credit. If you know your credit score, you can check what score auto loan companies require and choose the ones your score meets, which saves you some time. It also lets you know if you need to work on your credit any prior to putting in applications.

No one needs a bill they cannot pay, but that is especially bad if you already have bad credit.

Prevent that by determining how much for the car you can afford first. Take a look at your current budget. How much can you afford to pay out each month? You need a specific amount in mind so that it can help you choose the best auto loan.

Occasionally, you will find auto loan companies that do not require you to have a down payment, but it is always best to. The more you have to put down on a car, the less you have to borrow. The less you borrow, the better all around.

Additionally, when you have more to put down, you have a better chance of approval with a good interest rate and terms. Try to put up at least $1,000 for a down payment, but if you can save more, you will be better off.

Even if you apply online, you will have to sign certain documents and turn in some paperwork. Try to find out what exactly the lender asks for and have it all ready when you apply. If you can, have it all already scanned into or downloaded onto your computer so that you can send it to the lender more quickly.

Conclusion

While bad credit can interfere with your ability to get what you need, it does not necessarily have to put a halt to your plans. As you can see, there are auto loan companies willing to work with those who have credit problems. Explore all options, don’t hurry, and I am sure you will find the best place to shop for a car loan. Don’t let a low credit score get in the way of you getting the car you need.

How to Drive Off With A Pre-Approved Car Loan

Choosing a new car is hassle enough itself. Getting financing in order does not have to be. Before you start shopping for a car, have your financing lined up with a pre-approved car loan.

You have probably heard the terms “prequalified” and “preapproved”. Both are helpful steps but which one should you go for? Well, let’s take a look.

Getting prequalified is a simpler process but it gives you a more vague answer. Basically, a lender will take a quick look at your credit- a soft credit pull- and tell you what you might qualify for based on the limited information. Sure, it can be helpful, but it might change when they do the hard credit pull. Getting prequalified is like saying “Maybe you can get this loan”.

Getting a pre-approved car loan is a bit different.

Steps to Get a Pre-approved Car Loan

In this case, the car loan process is a bit more complicated. The lender does a hard pull on your credit. There is a deep dive into your credit score and report, giving them a good look at how you handle your finances. If you do get a pre-approved car loan, it is basically saying, “According to your current information, we should be able to loan you X amount at X percent interest.” Of course, if anything changes in the meantime, it can change your preapproval, but as long as it stays the same, you should get the pre-approved car loan amount at the offered interest rate.

Now, let’s take a look at how to get an auto loan.

Assess Your Finances

Before you even begin to look for a loan, you need to take a look at your current financial situation. Answer the following questions:

These are just a few things to look at to determine if getting a new car auto loan is a good idea at the time. As you look at your finances, you may notice things I have not yet mentioned. Just be sure you take it all into account.

Make a Budget

Next, you need to make a budget for a new car. Compare your incoming to your outgoing money. How much can you afford to pay each month on a loan payment?

It is important that you figure this out before speaking to a lender for a very important reason: They do not take your entire situation into account. When a lender determines how much to loan you, they are going by what they think you can afford.

The problem is that they are only looking at your regular documented bills. If you pay out $100 to charity each month or $50 for your daughter’s dance class, those numbers likely will not be factored in. Vacation money, date night cash, and birthdays are not typically factored in either.

This is why you have to look at everything yourself. You need to calculate everything you payout on a weekly, monthly, and yearly basis. Try not to leave anything out, no matter how insignificant it may seem. Only after you cannot think of another thing, then determine what you can spend out each month. Have this number in mind when you speak to lenders so you are not talked into borrowing more than you can afford.

Shop Rates

This is a biggie: You have to shop around for the best interest rates. Even one or two percent difference in rates can add up to a large amount. You want to find the absolute lowest rate that you can get.

Shop Cars

I am not yet talking about actually shopping for the car. I mean you should go ahead and figure out what kind of car you want. What does this have to do with getting a pre-approved car loan? Well, a couple of things.

First of all, the type of car you want determines the amount you need to borrow. By having two or three cars that you like in mind, you will know when you apply for a preapproval whether or not that lender can offer you enough to cover the car. If not, you will either know you need to find a new car or that you need to work on your financial situation before buying.

Another thing is that some lenders only work with certain types of cars. Some will not work with certain makes and models- mostly because they want to know the car will be valuable enough to sell should you not make your payments. Some only work with cars made after a certain year. Others require the car to have under a specific amount of miles. Having all of this information cleared up beforehand will help you narrow down lenders to apply with.

Shop Dealerships

While this is a little rarer, it is still important enough to mention: Some lenders will only loan money for automobiles from certain dealerships in the area. This may seem a little crazy, but you have to remember that if you decide not to make your payments, the lender is stuck figuring out what to do with the car to get their money back. They want to know that the dealer you are purchasing the car from does not have a history of selling cars in bad shape or something equally horrible. You might not run into this issue, but it is still something to ask different lenders before applying with them.

Apply

Your next step is to apply at the lenders you have chosen- preferably at least two or three, but more gives you a better comparison. By getting multiple pre-approved car loans, you can make sure that you are choosing the best one. Never settle for a loan until you have at least a couple of more to compare it to.

I understand that the idea of filling out several applications is exhausting, but it doesn’t have to be. Thanks to our digital age, you can now apply for loans- including car loans- online. Even better, if you choose a platform that is connected to a network of lenders, you can fill out most of your information just once.

I also want to point out the fact that you should do all of your applications within two weeks. Every time you apply for a loan- even for a pre-approval- it is a hard hit on your credit, which can bring your score down. If you apply for car loans in a spread-out period, each application will be a hard hit. However, if you do all of your applications for one industry- i.e. auto loan, mortgage, and so on- within two weeks, it only puts one hard hit on your credit.

Benefits of Getting a Pre-approved Car Loan

Most people do not apply for credit for a vehicle until they are at the dealership. Getting a pre-approved car loan before visiting the dealership, though, provides several benefits.

Know What You Can Afford

Your preapproval will give you the amount you will likely be able to borrow. This means that when you begin to shop for a car, you know what price range you should look at. This benefit alone is worth the trouble. It can keep you from overspending or tell you if you will need a secondary source to help cover your vehicle.

Know What Monthly Payments Will Be

When you get a pre-approved car loan, the lender should give you the information you need upfront. That includes what your monthly payments will be. If the payments will be too high for you, you will know to either look for another car loan or not spend the full amount of your pre-approved car loan.

You Can Shop Like a Cash Buyer

You have probably heard the term “Money talks”. This happens to be very true. If you can take cash to purchases for homes, vehicles, and a few other items, you have much stronger negotiation power.

Having a pre-approved car loan lets you do just that. Taking your approval note from your lender is like taking a blank check to the dealership. You can say, “This is my preapproval and this is what I am willing to spend”. Salespeople love when customers come with cash and will work with you to get the car you want.

Choose and Finalize Your Loan Within 30 to 60 Days

Pre-approvals are usually only valid for 30 to 60 days depending on the lender. A lot can change quickly, so just because you get approved now does not necessarily mean you can get approved again. Once you have chosen your lender, you need to find your car and finalize the paperwork as soon as possible.

That is actually another reason I said you should already have an idea of what car you want and where you are thinking of purchasing it. If you have these preliminary decisions out of the way, you can finalize your loan in plenty of time without having to rush.

Before you finalize the loan, though, take a moment to really look it over. Be sure that you know what is expected of you, any fees you could end up paying, how much your monthly payments are and where they need to be paid, and anything else that is valid to you successfully repaying the loan. This also gives you one last chance to make sure that everything in the paperwork is what you previously discussed with the lender. You do not want any surprises later.

What to Do If You Cannot Get a Pre-approved Car Loan

Of course, there is always a chance that you do not get a pre-approval. Different factors could prevent a lender from feeling comfortable enough to loan you money. What do you do then?

First off, try to find out why you did not get approved. Sometimes a lender can tell you this immediately. Others usually send out a letter of denial within a week or so pointing out things that might have caused the rejection. If you can figure out what is wrong, you can make a plan to fix it. Most often, you will need to do one of the following:

Work on Your Credit

This is usually the big one. Your credit is the lender’s reference point for whether or not it is safe to loan you money. They look at things like how much debt you are in, what type of debt it is, what your payment history looks like, whether or not you have any bankruptcies or judgments recently, and more.

If you are turned down due to your credit, take a look at those areas. If you need help, websites like Credit Karma can be a great tool. Not only can you check your credit score and look at your credit report, but the website also gives you tips on what needs to be fixed. It breaks down different sections of your credit and tells you where you stand with that section. This is a good place to start if you are rejected.

Increase Your Income

Another factor that can impact your potential pre-approval is your income. Actually, it is your debt to income ratio (DTI). This is the amount you payout compared to what you bring in. If your debt is too high or your income too low, the lender will think you cannot make your payments and reject you.

There are two ways to fix this: Increase your income or decrease your debt. In many people’s cases, it would take a combination of these ways to make it work. The more you can increase your income while decreasing your debt, the quicker you can make a big enough change to get your pre-approval.

Increase Your Savings

it is not always necessary for you to have money that you can put down on a car, but it sure never hurts. If you do not have any money for your car or just do not have enough, try to grow your savings. This can help in three ways: First off, the lender will see that you are serious because you have skin in the game, so to speak.

The second reason is that if you can put anything toward the car, it decreases the amount of loan you need. This not only gives you a better chance of getting a loan but also means you owe less back- which is a really good thing since we are talking about adding interest here.

The last reason is similar to the others but works a little differently. We talked earlier about secured loans, aka using collateral. You can actually use your savings or an investment account as collateral. So- again- with collateral, you can typically get approved for a larger loan amount with a lower interest rate. And, of course, all of that is good.

If you have been denied credit and you can manage it, try putting away at least $1000 to $2000, but the more, the better.

Conclusion

Getting a pre-approved car loan is not as tough as many think. If you follow these steps, you should find yourself with a pre-approval soon or- at the very least- a plan on how to get that pre-approved car loan. Just remember that if you don’t succeed the first time, don’t give up. Keep pushing forward until you get what you are looking for.

Speedy Tips for Buying a Car Out of State

Cars For Sale Stock Lot Row

Many people choose to buy a car out of state over buying a car in their state for various reasons. Sometimes, sellers are offering a much lower price than others or maybe someone in another state simply has the vehicle the buyer is looking for. No matter the reason, it is a common occurrence.

It can also be a troubling one if you are not prepared.

Speedy Tips for Buying a Car Out of State

Unfortunately, buying a car from out of state can take longer than buying one from down the road. The last thing you want is for it to take even longer because you- or the seller- are not as prepared as you should be. By following the tips in this article, you can speed up the process of buying a car from out of state.

Dealer or Individual?

Are you buying a car out of state from an individual or a dealership? The answer to this question will carry some weight on how you handle things. Buying a car at a dealership is much different than buying one from an individual. Many dealerships can handle all of the paperwork, financing, and everything else you need from afar. There is often no need for you to actually travel to get the car. This does not necessarily mean that you should not, just that you have more options. There are many other ways that things are different between the two, so decide which route you feel safest going before you dig in too far.

Do Your Research

Never, ever go into any purchase without doing some research- especially when the purchase is made out of state. Buying something at a Walmart while you are on vacation is not so risky because there are Walmart’s everywhere at which you can make exchanges and returns. Buying from people in different states is a little different. You may not ever see or speak to that person again, so you really need to do your research long before the sale takes place. Also, if you consider an auto loan, start thinking about where you should go shopping for a car loan.

 

Here is some basic information on what you need to look into when buying a car out of state:

1. The Seller

The seller- whether it is an individual or a dealership- should be checked out before dealing with them. It is easy to find information on dealerships as they tend to have websites and online reviews. Individuals might be a little trickier but not impossible.

Social media is a great tool for checking out individual sellers. In fact, most individuals that sell vehicles have probably sold something else on Facebook or Craigslist. Look up the seller’s name and see what you can find. There may not be any information if the person does not normally sell items, but it is still worth a look.

2. The Vehicle

You absolutely need to know everything you can about the vehicle- and not just the information given by the seller. In general, people are good and are not looking to get over on you. Still, there are some that are only concerned with themselves. As much as I would love to say that you can trust everyone, we all know that this is not true. You have to watch your own back.

Get the VIN, or the vehicle identification number, from the seller. This is a 17 digit number that is similar to a social security number. Each VIN is only intended for one vehicle, and that VIN keeps up with the history of the vehicle. With the VIN, you can learn about any accidents the car has been involved in, any work that has been registered, and more.

Have the seller take a photo of the VIN on the vehicle and send it to you so that there is no confusion of the numbers or letters of the VIN. It is typically in two places on the vehicle- under the front windshield and on the door jamb. You can then look that VIN up online and learn what you know about the car. You will need to pay for a vehicle report, but the cost is nothing compared to how much you might have to spend out if the car is a lemon. For legitimate reports, go through the National Motor Vehicle Title Information System or Carfax.

You can also check the U.S. Department of Transportation with that VIN to determine if there have been any safety recalls of that vehicle. You can even check for common complaints of that vehicle type. Having the VIN is incredibly important to ensure that you get a good vehicle. Do not skip this step.

3. State Requirements

One of the biggest mistakes one might make when buying a car out of state is not knowing the state requirements. This includes both the state you are purchasing the vehicle from and your own state as they will likely both have separate requirements. For instance, my state does not require an emissions test. However, a few years back when I lived in a neighboring state, we did have to get an emissions test prior to being able to register it. Although these two states are side by side, the requirements were very different.

For the most part, the requirements from your own state are the most important for you to pay attention to. But knowing the other state’s laws can help protect you. Let’s say the state in which you are purchasing your new car requires the seller to take certain steps, including providing a recent inspection report. That report could tell you many things you need to know about the condition of the car. But if you do not know that the seller is required to provide that, they could easily avoid giving it to you. However, if you know what is required, you know what to ask for.

Knowledge is one of the best ways to prevent someone from scamming you. To gain that information, you can look up both states’ government websites or even call the departments that handle registration. You might also consider having a lawyer ensure everything goes as it should.

Line It Up

You want to make buying a car out of state as easy and as smooth as you possibly can. While you might not be able to prevent all hiccups, there are many steps you can take to minimize difficulties. Before purchasing a vehicle from another state, have the following lined up to the best of your ability:

1. Registration

Just like every vehicle you purchase in state, you will have to register any car you purchase out of state. If you are purchasing the car through a dealership, they should send you all of the paperwork necessary to register the car. Buying a car out of state from an individual, on the other hand, might be different.

It is best to assume that you will be responsible for all paperwork so there are no surprises later. Call your state’s vehicle registration department and explain that you are about to purchase a vehicle from a different state. Ask what all you will need to bring with you to register the vehicle. Then, pass this information onto the seller. Be sure that they have all of the paperwork they are responsible for ready to go for the purchase. Otherwise, you might end up waiting for the sale to be final while you wait on the seller to get everything in order.

2. Taxes

There is a common point of confusion when it comes to the taxes involved when buying a car out of state. People often think that they can avoid paying taxes if they purchase the vehicle from a state that does not charge state taxes. This is simply not true. Any taxes charged go by your own state’s tax rate. This means that unless the state you live in does not charge state taxes, you will be paying taxes on your new vehicle. Be prepared to pay taxes when you register your car.

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3. Emissions and Inspections

  • Will your state require that the vehicle has an emissions test prior to registering it? If so, you need to know where to have this done, how much it will cost, and how long you have to do it. You should be able to easily get this information from your state’s registration office
  • Has the vehicle had a recent emissions test? If the seller has had a recent emissions test, you should ask to see the results. If the car has passed, you can breathe a little easier as it should pass the one you have to get. However, if it has not had a recent test or it did not pass a recent test, you need to be more careful and understand why it did not pass the test
  • Has the car recently been inspected? You definitely want to check out any information there is regarding recent inspections. Still, you should plan to have your own done as well- especially if it is a used car. Find a trusted mechanic who is located near the seller. You can have the seller meet you at the mechanic shop before you make a purchase and have this inspection done
  • If you cannot make it to the inspection yourself, you can probably pay for the inspection over the phone and have the mechanic’s shop send the results directly to you. Some mechanics will even go to the car. However, you choose to do it, just be sure to get it done so that you are aware of any current or potential issues

4. Transporting the Car

How exactly will you be transporting the car? Are you going to drive it back yourself or will you hire a transportation company to bring it to you? Most dealerships have ways to get the vehicle to you if you need them to. If an individual is really desperate to sell the vehicle or you are willing to pay a little extra, they might deliver it to you themselves. Either way, you need to have all of this worked out before you purchase the car. How you choose to transport it can greatly affect the cost as well as your purchasing timeline.

5. Financing

How will you pay for the car? If it is a used one that you are purchasing from an individual, you might simply have the cash to pay outright. For other vehicles, you might need to get a loan. No matter how you choose to pay, have your financing lined up before you head out.

If it is cash, have it on you- or at least be able to take it out of an ATM close to the seller’s location. If you will need a loan, get your applications in and either get the cash or get a preapproval for the dealership. Most dealerships have their own online auto financing, but some people prefer to have alternate lenders available so that they can compare rates and terms.

If you are unsure of how to shop for a car loan, it is the same as shopping for insurance or even a big screen TV that you want. Check out multiple lenders and compare their rates, the amount you can get approved for, and the repayment term. Choose the one that offers the best overall package.

6. Insurance

While you typically have a few weeks or so to get your registration taken care of, insurance is a completely different story. In fact, you are legally required to have insurance on a vehicle prior to pulling off the lot- or out of the seller’s drive. Waiting until the last minute to get your insurance in order can make the whole process take even longer.

At the same time, though, you do not want to pay for insurance if you are not yet sure you will be buying a car out of state. You do not necessarily have to pre-buy the insurance. Instead, just go ahead and have the insurance lined up. Once you have the VIN of the car, shop around for the best insurance. Most insurance agencies keep quotes in their system for about 30 days. This means that if you get a quote one week and then decide to buy the car the next week, you should be able to simply call the agency back and get the coverage active.

Most agencies take payments online or over the phone and allow you to sign the paperwork online. Thanks to this, you can easily get your insurance hooked up on the day you purchase the car- unless it is when the agency is closed, like on weekends. If this is the case, you should go ahead and purchase the insurance prior to buying the car. If you choose not to get the car, you should be able to call and cancel the policy easily. Just ask the agency about its cancellation policy before making any payments. You will not be the first person to insure a car out of state, so the agency should have systems in place for catering to your needs.

7. Names on Title

There is something very, very important to pay attention to when buying any used car. The name or names on the title. Imagine that you go through the trouble of buying a car only to find out later that the person who sold it to you had no legal right to do so. As sad as it is, it can happen and it is a headache that no one wants.

Before buying a car out of state- actually, before you even waste your time going to the car- tell the seller that you would like to see the title. You need to verify three basic, important things- though your state may require more:

The Name on the Title

First and foremost, you need to be sure that the person you are discussing the purchase with is actually on the title. You can ask that they send you a picture of the name on the title, a picture of their face, and a picture of their ID. They can black out any pertinent information on the ID, as long as you can see their picture and name.

If they are uncomfortable sending a photo, you can ask them to Skype with you and show you the necessary documents there. Of course, you can verify identity in person. But if you wait until then, you might find out that you have been lied to and have wasted your time.

How the Name or Names are Listed

You also need to check how many names are on the title and how they are listed. If it is just the one name, this step can be skipped. However, if it is more than one name, you need to pay close attention.

Let’s say that you are talking to a Mr. John Smith about purchasing his car. If the car is only in his name, that is the only person you have to deal with. But what if the vehicle is in both Mr. Smith’s name and his wife’s name? The sale may require both parties, depending on how the title reads.

If the title says, “Mr. John Smith & Mrs. Jane Smith”, both parties have to sign the paperwork involved in the sale. If, though, the title says, “Mr. John Smith OR Mrs. Jane Smith”, you should be able to deal with either one. Both parties should not be required. To be safe, though, call the DMV in your state to be sure of their requirements.

Any Liens

Titles also show the names of any companies that have liens on a vehicle. For instance, if Mr. Smith had used his car as collateral for a loan, the lender’s name will be on the title as well. In theory, if there is a lien on the vehicle, the lender should have the actual title in hand. So this should not necessarily be an issue, but it is always best to double-check.

Once a loan is repaid and ownership is reverted back to the individual, the lender signs a line under their name showing that it has been released. Vehicle liens can get complicated. If you see that a lender’s name is on a title, double-check with your state’s registration office to ensure that the seller has the legal right to sell the vehicle.

Pay Attention

One final tip when it comes to buying a car out of state: Pay attention. Of course, you definitely need to pay attention to each step you take, how much you are paying, and other things such as that, but I am actually referring to something else. I mean that you should pay close attention to your gut.

If ever something does not feel right, take a breath and step away. Sometimes, we get bad feelings simply because we are confused about something or simply do not have all of the information. If something does not feel right, ask questions. And research more until you feel that you know all that you need to know.

Sometimes, we get bad feelings because something is not right. It means that our subconscious has picked up on something that our conscious brain has not yet. If you get a bad feeling that you cannot shake no matter how much research you have, you should probably let go of the sale completely. Additionally, if your significant other or even a friend tells you they have a bad feeling, stop, and pay attention. They just might have noticed something that you did not.

Conclusion

Buying a car out of state does not have to be too complicated or take too long. Follow the above tips one at a time to prevent overwhelm and to ensure you have everything in place. With the right preparation, you can be driving away in the vehicle you want in no time.

The Best Places to Shop for a Car Loan

Couple and the dealer selling cars look the car in the showroom.

It’s time to shop for a car loan, but how do you make sure you get the best deal? If you have bad credit or limited income, you may wonder if any lender will even consider your application without laughing you out of the dealership. For starters, the secret is not to limit yourself to dealerships and buy-here, pay-here car lots. You have so many other options today, and we want to help you shop for a car loan like a pro.

Now that you understand what a lender may look at when considering you for a car loan, it’s time to think about where you should go shopping for a car loan. The days of visiting a local dealership and crossing your fingers are over. You now have more options than ever when financing a new car.

Explore The Best Ways to Shop for a Car Loan

We don’t want to say that any option for securing a car loan is a bad one, except for scams designed to take your money without delivering a reliable vehicle. There are a growing number of options out there, and every consumer must find the best resources for their personal circumstances. The following list will introduce you to six of the best ways to shop for a car loan today. You can explore each option in more detail to determine their suitability to your current situation.

1. Secure a Car Loan from Your Bank or Credit Union

What if you could shop for a car loan without stepping foot on a car lot or talking to a pushy car salesman? It can happen when you shop for the loan first and the car second. It’s just like getting pre-approved for a home loan before you start looking at homes for sale in your area. You have to know how much you can afford to finance and ensure that you have the loan in place before you start fielding your options.

Banks and credit unions are a legitimate source of auto loans, especially if you have an established relationship with the institution. If they already have access to your banking history and can easily check your account to see your regular income, they may give you a chance even if you don’t have perfect credit.

Many credit unions are known to offer lower auto loan rates than larger banks. Some may even help you shop for a car that fits your needs from car lots and dealers that are already affiliated with the institution. Just keep in mind that credit unions and banks will check your credit and generate a hard inquiry, so try to go into your local branch and ask a loan processor if you have a good chance of acceptance before placing your application.

2. Shop for a Car Loan at a Smaller Car Lot with Different Financing Options

Smaller car lots often advertise auto loans for bad credit or low down payment options. Many have in-house financing, so they may approve consumers that are routinely turned down at dealerships in the same area. That’s most likely to happen if they allow you to buy the car directly from the lot and make payments to the lot rather than financing through a larger lender. The catch is that the lowest down payments advertised aren’t always offered to consumers with the worst credit or limited income.

Yes, you’re likely to need more money upfront if you make less money per month. Lenders want to see that you have a vested interest in making timely payments on the loan because they don’t want to lose their money if you default. If you don’t have a lot of monthly income, they will limit the amount you can borrow unless you can build trust through your down payment, credit history or other factors.

Most smaller car lots only offer used cars, so you won’t have the option of buying a new car. Many cars sold on these lots don’t come with much of a warranty, and some are sold as-is and you’re still required to make your car payments if it breaks down. A small lot will also check your credit, which results in a hard inquiry on your credit report.

Before everything, we recommend comparing loan options online. You may find reputable lenders offering better deals online, and those lenders may free you to shop for a car on any lot rather than limiting your selection to one small lot. If nothing else, you’ll have some bargaining power if you know what options you would have when shopping for a loan online.

3. Visit a Dealership

Dealerships are no longer at the top of the list for lenders that offer the lowest auto loan rates. Some are more willing to work with consumers with poor credit than others, but you will generally get the best deal if you have a high credit score and/or a large down payment. For some dealerships, you will need both of those factors to qualify for the super low-interest rates and cashback offers that you see advertised online.

You can visit a dealership just to see what they may offer, but keep in mind that they will check your credit and it will show up as a hard inquiry. Visiting multiple dealerships or car lots in a short period of time will lead to multiple hard inquiries, which in turn lowers your credit score in the short term. That could make it a bit harder to shop for a car loan through other options on this list if you don’t secure a loan at one of those dealerships or car lots.

If you do have great credit and believe you will qualify for some great deals advertised by many dealerships, you may want to consider shopping for a car loan online before you visit the dealership. You will have a great idea of your options before you walk onto the car lot, and that can give you added bargaining power when negotiating your deal.

Compare online offers

Finally, a dealership may seem like your best option if you want to buy a new car rather than something used. That was once the case, but online auto lending now gives you more options even if you prefer a newer model or something brand new. Comparing loan options online first will always give you the information you need to size up the offer you receive from your local dealership.

4. Shop for a Personal Loan, and then Apply the Funds to the Vehicle of Your Choice

Have you considered bypassing the process of applying for a car loan entirely? You can do that by shopping for a personal loan and using the cash to buy a car. In most cases, you will only receive enough money to buy a used vehicle, so new cars won’t fit your budget unless you have additional funds to add to the amount you borrow. If you do have a down payment in hand, you may end up with enough money to buy a reliable vehicle without the high-interest rates sometimes offered on car loans.

The best way to find out about personal loan offers is to compare rates from various lenders online. Loanry allows you to shop through a convenient marketplace, which brings reputable lenders together to save you a lot of time. You can explore auto loans and personal loans to see all of your options before making a final decision.

Just keep in mind that personal loans often have shorter terms than auto loans. You may have less time to pay the loan back, and you may still need to offer collateral when securing the loan. The car you’re purchasing is typically the collateral when you secure an auto loan, but other types of collateral are possible when you shop for a personal loan. Terms will vary from one lender to another, so comparing online is the fastest way to size up each lender and select the one offering the best deal for your current circumstances.

5. Finance a Car Through a Line of Credit or Credit Card

This financing option allows you to shop for a car loan online or in your local area without worrying about finance terms. Any dealer able to accept a credit card, debit card or personal check can accommodate your needs when you pay in full with a line of credit or credit card. The higher your limit on the card or line of credit, the more you will have to spend on the car. You may end up with much lower monthly payments than you would have to pay when securing a traditional auto loan or personal loan.

One thing to keep in mind when financing a car in this manner is the damage it may do to your credit score in the short term. Your credit utilization rate will jump up immediately when you swipe your card or charge up that line of credit. That may limit your options when shopping for home loans or personal loans until you pay off some debt and lower the utilization rate.

You should also consider the interest rate on your credit card. Take the time to shop for a car loan online first. That will show you what interest rate you might secure if you were to take out an auto loan. If those rates are much lower than your credit card interest rate, you may find a car loan or personal loan the more affordable option.

Get Information in the Bank Where They Already Know You

If you have established a long-term relationship with a bank that issues one of your credit cards, consider contacting them to ask about an auto loan. Some banks back credit cards and will also offer personal and auto loans to customers who pay their bills on time for a long period of time. They’re familiar with your payment history, and that may prompt them to give you a lower rate than other lenders even if you don’t have the best credit or the most substantial down payment.

6. Shop for a Car Loan Online

What if you could get a car loan online without leaving the comfort of your home? The availability of internet access around the clock has stimulated a growing auto sales market online, and many lenders are now accepting applications from consumers regardless of their location or where they want to shop for their new car. Even if it’s the middle of the night in your time zone right now, you can start shopping for a car loan immediately.

Loanry.com is one of the best ways to shop for a car loan online. We allow you to compare offers from multiple lenders at any time of the day or night. Your location doesn’t matter, and your personal information is always protected. Whether you’re interested in credit cards, personal loans or auto loans, we can help you find lenders willing to work with your credit score and other financial factors.

While there’s never a guarantee that you will find an online auto loan lender overnight, there’s a good chance that our marketplace will highlight options that you don’t know are available right now. Whether you have bad credit, fair credit or excellent credit, it’s always to your advantage to allow lenders to compete for your business. Don’t assume that you aren’t qualified for a car loan before you give our system a chance to compare offers generated just for you.

Factors that Determine Auto Loan Eligibility

Have you heard that it’s difficult to secure an auto loan these days if you don’t have perfect credit? That’s far from the truth, especially if you know how to shop for a car loan. There are many ways to secure a loan for a new car even if you have bad credit or limited funds for a down payment. The key is learning how to shop for a car loan with the right lender. That starts with understanding what a lender will look at when they consider your application for an auto loan.

Most lenders will look at the following factors when you ask to borrow money to buy a car:

Credit Score

You don’t need perfect credit to qualify for an auto loan, especially if you impress the lender with other items on this list. If you can catch up late payments, avoid hard inquiries, and eliminate some old debt in order to raise your credit score before applying for your loan, you may have a better chance in the credit department. If you are working on your credit score improvement, you are in a good position to even save money on your car loan.

Credit Report

Many auto loan lenders don’t look at old medical debt or other negative marks on your report. They may look at any previous auto loans that you’ve secured, especially if they ended with repossession or other negative circumstances.

Income

Make sure you can prove your average income for at least the previous three months when you start to shop for a car loan. Providing paycheck stubs or bank account statements will help you establish your income. Tax returns are typically not accepted because they don’t show a monthly breakdown of the income for the recent past. Car loan lenders want to verify that you have enough income coming in right now to pay your car payment. If you receive child support or other types of income, you will need proof of that if you want to include it in your income total.

Down Payment

The more you put down on the car upfront, the lower your car payments will drop and the more comfortable a lender may feel lending money to you. If you have bad credit or limited income, you may need a more substantial down payment to receive approval for a car loan.

Trade-Ins

If you have a vehicle that you can trade-in, it may decrease the amount of money you need to borrow. If you can provide a reasonable down payment plus a trade-in vehicle, you may have a great chance of getting a car loan with an affordable monthly payment even if your credit is less than ideal.

In Conclusion

Financing an auto loan isn’t as difficult as many consumers assume, even if credit scores and down payments aren’t ideal. Use the tips presented here to shop for a car loan that fits your budget and personal needs. In many cases, you will benefit from shopping for financing options before you even start looking at cars for sale.

A Motorcycle Loan to Help Get You On the Open Road

Two Wheels, One Engine

If I weren’t doing what I’m doing today… I’d be traveling around the world on the back of a motorcycle. (Donna Karan, Fashion Designer and founder of DKNY Clothing)

As someone once observed, there are two kinds of people in the world – those who ride motorcycles, and those who wish they could.
I’m not sure that’s entirely true, but neither is it completely without merit. For those of you who love their hog, chopper, cheese-burner, bike, beast, bagger, or bar-hopper, there’s simply nothing like hitting the open road with your machine.

A motorcycle can be practical, of course. They’re generally more affordable than automobiles, and they use way less gas. As long as you’re not trying to bring home too many groceries or pick up a half-dozen kids from their activities, there’s a certain appeal to just strapping on that helmet and getting where you need to go.

Still, the practical stuff is almost secondary, isn’t it? That’s not why we ride – at least not mostly. It’s possible there are a few out there who choose their vehicle primarily to get from one point to another, but…

That’s weird, right?

Most motorcycle enthusiasts insist that there’s something about the ride itself that makes it unlike any other form of transportation. The closest comparison is probably the relationship cowboys used to have with a good horse. It’s a tool – it’s there to work for you, essentially – and yet, it’s almost a companion. An object of affection. Some would say a work of art.

That may be going a bit far, in my humble opinion, but then… it’s not my horse. Er… motorcycle.

Financing Motorcycles – A Beginner’s Guide

Driving a motorcycle is like flying. All your senses are alive. When I ride through Beverly Hills in the early morning, and all the sprinklers have turned off, the scents that wash over me are just heavenly. (Hugh Laurie, Actor)

The procedures and considerations for a motorcycle loan are in many ways similar to any other sort of vehicle finance. Be aware, however, that not all auto lenders do motorcycle loans, and dealer financing at a motorcycle dealer may be handled a little differently than at your local car lot.

Dealership Financing

Like auto dealers, name brand dealerships may sometimes offer amazing rates or zero-interest deals in order to move inventory or spark interest. If you’re looking at a motorcycle loan, see what the dealer can do.

Other times, however, dealerships use financing to cushion the low-profit margins of the internet age. It’s great that we’ve reduced all the haggling and secrecy and suffering of your father’s vehicle-buying experience, but dealers still have to make a few bucks to keep the doors open and all those colorful balloon-men inflated. That can mean pushing add-on packages you may not need or partnering with outside financial institutions to milk a little extra out of the small print.

They may want you to be happy with the bike, but that doesn’t mean they’re automatically your best source for a motorcycle loan. At the very least, do some loan shopping BEFORE you get serious about selecting a motorcycle, or even a dealer. Know your options so you can discern whether or not what they’re offering works best for YOU.

Banks / Credit Unions

There’s nothing wrong with checking out your local options for a motorcycle loan. Credit unions usually offer better terms than banks, but you must be a member to qualify. How difficult this is varies with the credit union. Some are very particular, and unless you work in a specific industry or meet their exact requirements, you’re out of luck.

Others will pretty much take any excuse to let you join. My local credit union targets educators, but if you’ve ever worked in a public or private school in any context, have kids in school, or have ever been to school yourself, you qualify. That means there are maybe a dozen people in the entire U.S. who couldn’t open a savings account with them. The only way to really know is to ask.

Online Lenders

You’ve probably already figured out that we’re partial to this option around here. Online options generally mean convenient logistics, competitive rates, and flexible lenders, for a motorcycle loan or anything else.

Many online lenders are happy to work with you if you have limited credit or less-than-perfect credit history. They’ll still look at your credit score, and if you’re applying for a motorcycle loan, they’ll pay particular attention to your track record with vehicle payments. A lower credit score means higher interest rates and sometimes additional upfront costs because you’re technically a higher risk for the loan.

But just because your credit rating matters, for better or worse, wherever you apply, that doesn’t mean all loans are the same or that all lenders will handle it the same way. Online lenders are nimble by design, and some specialize in higher risk loans and developing long-term relationships with customers who need to build their credit history just as much as they need to take home that two-wheeler. They’ll look at your job history, your debt-to-income ratio, and whatever else might make you an acceptable credit risk. In short, they’re looking for ways to say YES.

I’d tell you that this is where Loanry comes in, but I suspect you know this by now. Yes, we’re very good at connecting people with reputable lenders. No, we don’t charge you for any of it. We help you connect; you decide whether or not to move forward with whatever offers are made thereafter. Of course, we hope you end up with a great online motorcycle loan – but that’s mostly just because we like you.

You do not need a therapist if you own a motorcycle, any kind of motorcycle! (Dan Aykroyd, Actor and Comedian)

Types of Loans

Generally, you want to finance your purchase with a loan specifically designed for whatever you’re buying. There are, however, other sorts of credit which could conceivably be used in place of a traditional motorcycle loan.

Credit Cards

If you have a high enough credit limit or choose an affordable enough bike, you could simply charge your purchase on a credit card. It’s certainly convenient since you don’t have to qualify for anything new – you already have the card and an approved limit. This also avoids adding another bill to keep track of. Your required monthly payments will go up as you increase your balance, but it’s not a separate obligation you’ve added on – just more of something you’re already paying.

On the other hand, unless you have a particularly good interest rate on your current credit card, you’ll end up paying more in interest this way. Credit cards are also difficult to pay down if you make the minimum required monthly payment, while a traditional loan has a set term and the same payment required each month.

Line of Credit

A line of credit, sometimes called “revolving credit,” is in some ways similar to a credit card. You’re approved for a maximum amount, but only take out what you need as you need it. This means you’re only paying interest on money you’ve actually used.

A line of credit is generally more practical for ongoing expenses, such as those associated with a small business, but there’s nothing that says it can’t be used in place of a motorcycle loan. It is difficult to imagine the circumstances in which this is your best plan, however.

Family or Friends

The pros and cons of personal loans which are this, well… personal depend entirely on the individuals involved. You may get great terms from Uncle Gustav and the flexibility to skip a month here and there if he knows you’re in a rough patch. On the other hand, it might mean some very uncomfortable holiday dinners or unnecessary family drama.

Money and relationships don’t usually mix well. That doesn’t mean they never work out– but be honest with yourself. I want you to get that bike, but in the end, people are more important, right?

Um… right?

What Factors Influence My Motorcycle Loan?

We’ve already talked about the importance of your credit rating and credit history. Those aren’t the only factors in what sort of motorcycle loan you can reasonably expect. Here are a few of the most common…

Purchase Price

This one’s a bit obvious, but there’s more to it than you might immediately recognize. The difference between a $5,000 motorcycle and an $8,000 motorcycle isn’t $3,000 – it’s $3,000 plus the additional interest on the loan. If the higher price means you stretch the terms out for 6, 12, or 18 months longer than you would have otherwise, the total cost over the life of the loan will be even higher.

I’m not saying don’t get the machine you want; just realize that when you finance, it’s about more than the purchase price.

Down Payments and Interest Rates

Motorcycles, in general, aren’t as expensive as cars or trucks, but it’s easy to spend $10,000 or more on a decent bike. Let’s use round numbers and assume you buy one for exactly that amount. You’ve been saving up, and manage to pay $1,000 down, leaving $9,000 to finance.
You work out a motorcycle loan at 4.5% interest to be paid back over 36 months, making your payments around $267. Assuming you stick to the schedule, by the time the bike is paid off you’ll have paid $638 in interest. Fair enough.

Let’s finance that same amount at 4.9%. It doesn’t sound that much higher, does it? We’ll also assume you’ve decided not to use your savings as a down payment (I’m sure you’re doing something responsible with it and not blowing it on scratch-off tickets and overpriced coffee). If you stick with 36 months, interest over the life of the loan will cost you about $773. Your monthly payments will now be $299. This may not sound like a dramatic difference until you think about what $30/month can actually do.

Just one more. Hoping to keep your payments down, you stretch that same loan of $10,000 at 4.9 over 48 months instead of 36. It works, sort of – now your monthly payments are around $229. Over the life of the loan, however, you’ll end up paying over $1,023 in interest – a substantial difference for such a short time frame.

New vs. Used Motorcycles

Buying a used motorcycle can mean big savings on your motorcycle loan. Prices are typically much lower than new machines, so you’re financing less and hopefully setting up a shorter term for paying it off. Used motorcycles depreciate more slowly than new, so you’re less likely to find yourself “upside down” on your loan.

On the other hand, used motorcycle loans, like used auto loans, tend to carry a higher interest rate than when you buy new, making your monthly payments a bit higher and meaning you pay more in the long run for the money you borrow.

I really love to ride my motorcycle. When I just want to get away and be by myself and clear my head, that’s what I do. (Kyle Chandler, Actor)

Preparing for a Motorcycle Loan

Whether you’re applying at a local bank or credit union or exploring online options, there are a few things you can do to maximize your time and effort and make the process as painless and efficient as possible for yourself. It’s all about information and preparation.

Revisit Your Budget

Just because you can get approved for a certain motorcycle loan amount doesn’t mean you should spend your maximum. Hopefully, you already have a household budget to assist in making these sorts of decisions; if not, it’s time to put one together.

Obviously you want to purchase a bike you’ll be happy with. Keep in mind, however, that whatever loan arrangements you make won’t go away just because you’re roaring down the road feeling awesome. Let’s remember the less exciting but no less significant feeling that comes from being able to successfully cover your monthly expenses when you get home.

“Keep my motor running – head out on the highway. Looking for my checkbook and whatever I should pay… Like a true, mature adult, I was born, born to be pragmatic. Don’t want my debt so high that I can never afford to die… Born to be… solvent…” (No? I’ll try again.)

“Here I go again on my loan… paying down the only bike I’ve ever owed…” (Still not doing it for you? Maybe just one more.)

“All I wanted was to be free, and that’s the way it turned out to be. Flow credit, flow, let your waters wash down – keep me on this road to pay everything off in a timely and responsible manner…”

Clearly I’m in no danger of becoming the Weird Al of financial wisdom. Perhaps we should move on…

Check Your Credit Report

You don’t want to find out there’s an issue with your credit history or a problem with your credit score while you’re in the middle of applying for a motorcycle loan. It’s easy to check your credit ahead of time for free, so there’s really no excuse.

If you discover an error on your credit report, it may take a few days (or longer) to resolve it. Don’t wait until the last minute to do this part. In fact, it might not hurt to save your place and check your scores now.

Don’t worry, I’ll wait.

Comparison Shop

You may have a pretty good idea of what sort of motorcycle you want to get. That doesn’t mean you shouldn’t explore your options, however. Knowing what else is out there – features, costs, etc. – arms you with information. Besides, you never know when you’ll fall in love with something you didn’t even know existed.

The same is true of your motorcycle loan as well. Comparison shopping is essential to getting the best deal available to you. It’s not just about interest rates – it’s about terms, other charges or fees, and making sure you’re comfortable with your lender (you’re going to be dealing with them for a while). Arm yourself with information. Keep an ongoing list of questions you want to ask and important details you wish to compare.

A motorcycle is a long-term commitment; so is a motorcycle loan.

To Thine Own Self Be True

In the end, no one else can tell you what to buy or the best way to finance it. Every situation is different and you know yourself better than anyone else. But go in as informed as you can and as prepared as possible. I’m not trying to take the fun out of buying that bike; I’m trying to make sure it’s still fun a few months later when the “new” has worn off but your obligations remain.

See you on the road!

Auto Loan Process at Dealership to Help You Drive Away

Cars are really awesome to have. They get you where you want to go when you need to go. And they cut the time it takes to run errands, let you cruise around when you are bored or just need some quiet time, and take you to see friends and family. They are incredibly useful—until they break down anyway, or start to show signs of it.

At that point, I always wish that I could be in good enough shape to run to my destination, or at the very least have some public transportation in my city. Buying a car is not an easy task, especially if you have to come up with the money to do it. With all of the other stress in life, who wants to add car buying to the mix? As if finding myself a vehicle is not enough, I have a child who just turned 16 and two more that will be turning 16 over the next few years. Thank goodness I have a decade before the little one hits that age.

Considering all of the car buying my husband and I will be doing over the next several years, auto financing is definitely going to be part of the equation. For many, the auto loan process can get confusing, but it doesn’t have to be. Let’s try to simplify it.

The Basics of the Auto Loan Process

An auto loan is very similar to almost any other loan you might get. At its very basic nature, it simply means that you are borrowing the money to pay for your new vehicle. You then repay the loan in monthly payments. The differences between an auto loan and other loans come in with the actual lenders, interest, and terms. We are going to break down the steps you will go through at the dealership, the advantages and disadvantages of the auto loan process at the dealership, and how to make dealer financing work for you. Don’t worry, by the time we finish, you should be ready to take on the world- or at least the car dealership.

Steps in the Auto Loan Process at Dealership

If you have never gone through the auto loan process at a dealership, you are probably wondering what that entails. Let me say that some of the steps will look similar to doing it through other institutions. Some are nothing like it. Let’s start at the very beginning.

First, though, a little disclaimer: though I am going to be very truthful with you about the sales process and salespeople, not everyone is the same. There are many salespeople out there that are quite unscrupulous, but some are not. Either way, the best thing to do for yourself is to expect the worst. So you are ready for whatever comes your way.

Stepping Onto the Lot

You pull up at the dealership and get out of your car. You may choose to go inside and ask for a sales rep, but if you just walk around the lot for a minute, they will find you. When they reach you, they are going to take control of the situation immediately.

They will ask you questions, i.e. what type of vehicle you are looking for, and they are going to start showing you cars. Do not be surprised when they take you to a vehicle that is nothing like what you mentioned. They want to sell the car that is going to line their pockets.

And salespeople excel at painting an awesome picture. Before you know it- if you are not paying attention- you will believe that the car that is twice the price you were hoping to pay is the car you absolutely have to have. This is why you need to know as best as you can what you want and how much you are willing to pay beforehand.

Choosing the Car

One fun thing about buying a car is getting to test-drive vehicles. Take advantage of this- not in a bad way. Just be sure that you test out the car or cars you like and that you still like them after driving them. And do not feel pressured to test drive a car you do not want. There is no reason to tempt yourself. Stick to your guns.

When you find something you really do like, the salesperson is going to tell you all about the promotions they have going on, though they will probably still try to talk up another car or two. When you make up your mind, they will take you to the finance office.

The Finance Office

Here’s where it gets fun- not. You now have to deal with all of the wonderful financial documents and so on. If you have a trade-in, you ask for an offer on it. Trade-ins can assist you with your down payment. This is also where you can show or talk about any other offers you have received from other institutions.

With or without a trade-in, there is certain information you will need to complete the auto loan process and application. Here are the most common to help you speed up the auto loan process:

  • Proof of Income- Recent pay stubs usually, but earning statements and tax records if you are unemployed or have uncommon income streams.
  • ID and social security cards
  • Proof of insurance- This may seem strange since you do not yet have the car, but they usually will not let you drive off of the lot without insurance, so be prepared to go get some and come back with proof.
  • A list of references- Have family, friends, coworkers, associates or anyone else that will give you a good reference. It is best to have a mix of the types of references, such as some family, some coworkers, and so on. And, if you have any financial references such as a landlord or previous lender that are willing to vouch for you, add them to the list.
  • Collateral- This is not necessary for everyone, but if you know your credit is less than desirable, collateral can help. Take proof of that collateral with you but do not offer it up unless you are rejected without it. (You don’t want to just give it away if you don’t have to.)
  • Bills- Many lenders will not ask for this, but some will when they are calculating your debt-to-income ratio.

There is always a chance the lender will ask for more, but these items definitely cover most of it. Also, showing up with what you need can make you look a little more responsible to the lender.

The Finance Manager

Once the manager has your application and your information, he or she will pass it on to their lending partners. It usually does not take long for the offers to come back as preapprovals- sometimes it takes just a few minutes. Once they have received the offers, the information will be passed along to you. We will talk about this a little more in-depth in a moment.

Should you choose to accept any of these offers, the paperwork will resume- and it may feel like you are signing your life away. Do not sign a thing unless you understand it. That teeny-tiny print at the bottom of your applications and contracts may be a headache to read, but not reading them can put you in a situation you never wanted to be in. For instance, you may think you signed up for a fixed interest rate because that is what you were quoted, but the fine print may say that the interest rate will change after a certain time frame or that it is actually variable. If the dealer really wants your business, they should have no problem going over the paperwork line by line if that is what you need. If they do have a problem, move onto another. You need transparency.

Beware…

Here’s where it can get a little troubling, and irritating: A few days after you leave the lot, the finance manager may give you a call. Unfortunately, this is not a “Hey, just wanted to see how you’re doing” type of call. No, more than likely, they are about to try to sell you a big one- a big lie, that is. They will probably say something like, “The financing fell through,” or even, “We found you a better deal. We just need you to sign a new contract.”

Let’s start with this: The financing is in place when you sign those first contracts and drive off the lot. It does not “fall through”. This is simply a gimmick to get you to sign onto another interest rate and repayment term- a much less favorable one. Do not fall for this. If you signed a contract, your financing is in place.

If they call for a lower payment, that usually means they are going to call you back later with something that is going to cost you more. For instance, sometimes they will say you have to sign a warranty or purchase additional insurance to get the lower car payment. The problem is that whatever the extra thing you have to purchase is taking your payment over the amount of the original payment, so you are really not getting a lower payment at all. You can find stories about such things happening all over the internet, so it happens more than I care to think about. Beware of anything that is going against what you already agreed to.

Once you have received your loan, you need to be sure you are making your payments on time every month. The last thing you want to do is work so hard to get the car only to lose the car, your money, and all of the hard work you put into it just from missing a payment. Sit down as soon as you know your payment amount and budget it in.

Advantages and Disadvantages of the Auto Loan Process at Dealership

As with all things in life, there are good points and bad points. In the case of going through the auto loan process through the car dealership, both are plentiful. Overall, getting an auto loan is obviously going to get you into a car quicker than just saving up the cash to do it yourself. That is the sad truth for most of us. But is getting a loan through the dealer the best idea? Some people swear by it, saying it is the easiest way to go. Others avoid dealership financing at all costs. Let’s take a look at the pros and cons so you can make that decision for yourself.

Advantages of the Auto Loan Process at Dealership

Multiple Options

Dealerships are usually connected to at least a few finance options, meaning that you often get more than one finance option. When I worked for Mattress Firm, a very large mattress retailer, we had three lending options- for good reason: most people do not have thousands lying around to purchase a mattress outright- no more than they have tens of thousands of dollars to purchase a car.

So the company connected with three different lenders that gave buyers options, but they were different. The first one we always recommended and tried to get the customer approved for was the one that offered the best interest rates and repayment terms. That lender would often offer 0% interest for three to five years. But they required really good- almost perfect- credit.

The second lender accepted credit scores that were lower, but they also offered less favorable repayment terms. Still, the second lender was better than the third, which was 90 days same as a cash finance option. When those 90 days were up, interest shot through the roof and, if you were not careful, you would pay three or four times the price of the mattress.

While not exactly the same, dealership financing is similar. The finance manager will run your credit and information. If any of their lenders are willing to extend you credit, you should end up with a few different options to consider.

Simplified Process

One good thing about dealer financing is that it can be treated as a one-stop-shop. You go in, find your car, test drive it, fill out for financing, and- if everything lines up- drive off with your car on the same day. Going through an external lender adds more steps and more time to the process. It can still happen in a day or two, but it could take even longer.

Promotional Prices

When you finance through the dealership, you may get access to promotional prices. Just as the mattress store I mentioned offered 0% interest for a specified time, you often see those stickers on the cars that are sitting on car lots. That does not usually happen through external lenders, though it never hurts to look around.

Disadvantages of the Auto Loan Process at Dealership

You Might Not See the Best Options

Here is something you need to know about the auto loan process at dealership: Just because the finance manager receives multiple offers does not mean you will be shown the best. The other part of being connected to lenders is that the finance manager gets a fee for sending them business. Unless you run across one that is really honest, they will look over the offers and present the one to you that gets them the best fee, not what is best for you. While there is nothing with them making money, too- everyone has bills to pay- you do not want that to be at a major expense to you.

Promotional Prices and Offers Can Be Misleading

Many times, the promotional prices offered through the dealership are only available for certain credit scores, or they are conditional. Additionally, any rebates, low interest, and so on may not be as good as it sounds. You might find that taking a low interest rate from an external lender will cost you much less in the long run than the promos offered through dealer financing.

You have to really consider what is being offered to you, which is usually difficult when you are at the dealership actually in the midst of the auto loan process. The salesperson does not want you to think it through. They want you to get excited about what they offer and get you signing the paperwork, immediately. The sooner that happens, the sooner they get paid. Have you ever noticed that when you are shopping for something that the salesperson does not want to leave you alone? They do not want to be quiet and just keep talking up the sale. If they ask you questions, those questions are specifically geared towards showing you just why this sale is the best thing that has ever happened to you and how the product is going to change your life.

Remember…

That is what they are trained to do. It is not that the product or sale is a bad thing. And- just like the mattresses I sold- they can impact your life. It is just that you need a moment to think. To really consider what you are being offered and decide if it is right for you. Salespeople know- or should I say, they fear- that if they leave you alone, they have lost the sale. That the illusion will wear off if they are not there painting a picture for you. That is why it may be best that you step away- possibly off of the lot- to think and run your calculations.

Lack of Personal Relationship

When going through the auto loan process with your bank or external lending institution, there is a good chance that you will form a personal relationship with them. You may even have a personal relationship already if it is someone you used before. Often, places that you have this type of relationship with are easier to work with, really try to get you a better deal, and try to help in the time of crises. Lending institutions strive for repeat business. Dealerships know that car buying is not something that happens every day, so they are more interested in the now.

Make Auto Dealership Financing Work for You

Choosing to go through the auto loan process at the dealership can be either a positive or a negative decision. The better you educate yourself and prepare yourself to deal with the loan process, the better results you should get. Here are some things you should know and do to be prepared:

See All the Offers

Be sure that you ask to see all of the offers presented. If, for some strange reason they refuse, you should probably move onto another dealer. Unless they have something, aka a really good offer to hide from you, there should be no problem showing you all of the offers.

Get Prequalified

It is never a bad idea to get prequalified for a loan from an external lender prior to shopping a dealership. Often, if you go in with a preapproval or offer, your dealer will work to beat that offer and rate. This opens up even more options for you and lets the dealer finance department know you are not messing around.

Know Your Budget and Your Credit Score

Know your credit score and the types of terms before going in. It’s sad to say, but there are unscrupulous people out there. If you are not aware of what your credit looks like, the salesperson just might be able to fool you into paying higher interest than you should.

Know what you can afford to pay each month. If you set expectations with your dealer upfront- and stick to them- they will be less likely to mess you up. Know what you can afford, and do not waiver from that, regardless of the “great deals” they try to offer.

Sign Everything Before You Leave

Never, ever, ever leave the dealership without all of your paperwork signed- especially your financing. This will prevent them from being able to tell you the financing did not work out and talking you into something higher. If they try anyway, you can say, “Nope, sorry. I’ve got a signed contract. I get the car and the financing at the price agreed upon.” They cannot back out on that once we sign the contract.

Avoid Impulse Buying

I do not care how hard the salesperson tries, do not sign any paperwork or agree to anything just because they tell you it is the best thing to do. Also, you might notice that if you fall in love with a particular car, they will push and push to try to convince you that if you do not get it now, you are missing out. FOMO, or the fear of missing out, is something that all salespeople learn to use to their advantage. Let me make something very clear: that is not the only car like that. Cars are mass-produced. Sure, that may be that only exact car on the lot at that moment, but they can get another one there. And, guess what, if they cannot- or say they cannot- another dealership will.

A Short Story Time

I remember one time when I fell in love with a specific car and dealt with the, “You better move now! These don’t last long!” Well, I like to think things through, so I say, “I still need to take a moment”. The salesperson kept on, finally stating, “A colleague just told me that he has someone coming in to look at this very car this afternoon.” I was becoming quite irritated- maybe because I did not like sales techniques when I was being trained for them. I value honesty, my time and my money- something I always tried to value with my own customers. (And, there’s a reason that I left that job, anyway.)

Still, he was frustrating me. I wanted to say, “Dude, I know what you are doing and it isn’t going to work.” Instead, I said, “That’s okay! I saw one down the road at another car lot. If this one’s gone, I’ll just move onto that one. No biggie. I think they had a better promotional deal, anyway.” His face went a little white before he recovered long enough to say, “Oh, no, don’t worry about it! I’ll make sure it’s sitting here when you get back.” Yeah, that’s what I thought.

The moral of the story is that you do not have to rush. Take your time, make a wise decision, do not fall victim to the unsavory sales techniques.

Conclusion

I hope that this information has helped you understand what to expect in the auto loan process. And how to make it the best experience for yourself and your pockets. Educate yourself as much as possible to simplify the auto loan process. And, if need be, take a trusted friend along with you who can help keep you on track. If you find that you do not like the offers made to you by the dealership, learn how to shop for a car loan online for a more favorable loan.

Dealer Financing Explained Without The Car Salesman Pitch

Buying a car sounds fun until you start shopping for it. At that point, you realize how much work goes into choosing the make, model and getting the loan for the new or used vehicle.

Once you have done your research on vehicles and have determined what you actually want, you need to shop around to find the best deal on financing unless you have tons of money in the bank.

If you know how to car shop, you know that you need to create a budget. And if you know what you can afford each month as a payment, then you know what you can spend. So, if you can save up a larger down payment, you can reduce your monthly payments. If this is your first car, you probably need to learn how to shop for a car loan.

Financing Your Loan

The time comes when you need to determine how best to finance it. Your choices probably include the bank, credit union, dealer financing or savings. Your first decision is either used car loans or new car loans. You need to know whether you will buy a new or used car.

Banks and Credit Unions

You can get a loan from your bank or credit union with a relatively strong credit score. We’re talking between 600 to 700. Banks like to loan to people who already have established good credit. Most credit score systems top out at 800 or 900. (Yes, there is more than one scoring system.) Regardless of whether it tops out at 800 or 900, realize that 600 to 700 translates to a really good score. The lowest score on any of the scales is 300.

Dealer Financing

So, what if your score drops below 600? You can still get a loan, but you will probably need to go with dealer financing. This option lets you borrow the money although you should be prepared for much higher annual percentage rates. Your interest payments can be remarkably higher with a dealer provided option.

Savings

It is totally wonderful if you happen to have thousands of dollars in the bank that it takes to purchase a car outright. Most people do not have that ability. However, if you do have this option, use it. You can very easily save yourself money by using your savings since you do not pay interest or finance charges on money that you own.

More on Dealer Financing

You already know what savings are and you probably have some familiarity with bank and/or credit union loans. On the other hand, dealer financing may just be a phrase you have heard on television commercials.

Dealer financing also referred to as special financing, refers to a type of loan called an indirect loan. This loan starts with the retailer which offers it directly to its customers. The retailer then sells the loan to a bank or another third-party financial institution. The financial institution typically purchases the loan at a discount. You still end up making payments of the principle and interest to the bank. payments from the borrower.

The auto dealership usually has an agreement set up with the bank already. If you read the fine print on the loan information at the dealership, you can determine which bank will ultimately own the loan.

Car purchase financing is probably the best-known example of dealer financing although you also see it in appliance dealerships and some major home improvement stores. You should really use it only as a last resort and here’s why.

Although the bank that ultimately buys the loan and the dealership work together to create the program, they do so with their profit in mind. The financial institution offers the dealership an interest rate that fits most consumers, also referred to as the buy rate. The dealer can then add to the interest rate it offers the customers.

Eek, Those Interest Rates

Why would they do that? It better covers their risk. Every entity involved in making loans is risk-averse. They add fees and interest rates to the loan amount to alleviate the risk. You pay them these extras upfront and on a monthly basis as risk rent.

Automotive dealerships want to sell cars. Most have an existing affiliation with an automotive manufacturer. They report their sales up the chain of command to the manufacturer. These dealer financing programs let the dealerships offer loans to people who would not typically qualify. That helps them sell cars to people who could not generally purchase them. These buyers might not normally qualify for bank financing due to a bad credit rating or other reasons.

The bank that buys the loan gets the interest rate they provided to the auto dealer. The auto dealer gets to keep the money from the mark-up on the interest rate. It becomes an extra profit for them.

Automotive dealers face no obligation to offer customers the best available interest rate.

The dealership gets to arbitrarily set higher rates or longer terms. The dealer can keep your loan rather than turn it over to the bank or other financial institution.

The Benefit to the Dealership

Not only can offering loans at the dealership mean that the auto retailer sells more cars, it means they sell them quicker. Rather than wait for a car buyer to arrange their own financing, the dealership can offer the financing so that the customer can purchase that day.

The Benefit to the Customer

Using dealer financing reduces the effort and time to obtain a loan. You can drive off of the lot with the car you like, typically on the same day you see it. It also provides an option for those with bad credit who cannot otherwise afford a bank loan.

Caveats to Dealer Financing

Not only might the interest rate cost more for a dealer loan, but there can also be other tradeoffs. Auto dealers extending financing to high-risk customers may install devices in the auto that disable it from starting if the customer misses payments. This also helps them repossess the vehicle if needed.

Other Terms Regarding Dealer Financing

Buy Here, Pay Here (BHPH): The terminology of dealer financing includes buy here, pay here which refers to automotive dealers that sell and finance vehicles.
In-House Financing: The term in-house financing refers to a seller financing program that provides customers a loan, so they can purchase its goods or services.
Floor Planning: Floor planning refers to a type of financing for large ticket items displayed in showrooms.
Subprime Auto Loan: A subprime auto loan refers to a loan type that features a high-interest rate. People with high credit scores qualify for prime rate loans while people with lower credit scores qualify for subprime loans.

The Truth About Car Dealerships

Car dealers may lead people to believe that they purchase their vehicles and that ties their money up in inventory. Not at all true. The auto dealers take out loans themselves to amass their inventory. The manufacturers provide the financing, the above-defined floorplan financing. You might think the dealer then loses money on interest, but that is not true either. The manufacturer reimburses dealers for their loan financing through a dealer holdback that typically equals one to three percent of the vehicle’s invoice price.

Here’s how it works. It might cost the auto dealer $350 a month to finance each vehicle. Let’s say a car takes two months to sell. The interest costs them $700. The car costs $20,000 though with a dealer holdback of three percent. That equals $600. If the auto dealer sells the vehicle in one month or less, they make a $250 profit just off of the holdback. The holdback remains the same regardless of how long the car sits on the lot. The interest accrues though.

That is another reason that car dealerships want to move vehicles off of their lots quickly. They did not sink lots of their own money into the inventory. Sp they did the same thing you will do to buy a car or truck. They took out a loan. Their loan costs them interest, too.

Let’s look at the math again. The dealer takes delivery of the same $20,000 car, but it sits on the lot for a few months. Let’s say it takes four months to sell it because there is a local depression going on and lots of folks lost their jobs. It does not sell until a new employer moves to town and hires a slew of new local people. With folks employed again, the cars start moving off of the lot again. Still, the dealer holdback of three percent stands. So does the manufacturer’s interest rate that comes to $350 a month interest. That means that interest cost them $1,400, but they recouped $600. If they are lucky, the manufacturer is also offering a manufacturer-to-dealer incentive of $250 per sale.

Automotive dealers make most of their money from the following:
– the extra money on your car loan interest,
– selling add-ons,
– trade-in vehicles.
The interest that dealers charge you over and above the bank’s interest rate can net them as much as $3,000.

When it comes to trade-ins, they low-ball the price they give you, then they turn around and sell it for a profit after a little detailing and regular maintenance. The dealer makes about $2,000 on the trade-in once it sells. Then there are the add-ons. These include accessories to the car, maintenance packages, gap insurance, an extended warranty, and much more. Between parts and service plus on-site maintenance, the dealer can add about $3,000 to their profit.

All of that together means the dealership makes about $10,000 off of the sale of a single car. Now, you see why they so badly want to move vehicles off of the lot quickly. The interest rate from their own loans from the manufacturer quickly eats up the profit potential. If a car sits on the lot for six months, it quickly eats into their profit. Six months cost them $2,100 in interest alone.

Getting Ready to Apply for an Auto Loan

Before you jump into the actual car shopping and auto loan applications, plan out your budget and get your credit ready. You typically know ahead of time when you will be car shopping. Start about six months before you want to buy your new or used car getting your credit ready.

While you have moved into credit checking mode, go to Creditry.com to learn how to manage your credit. This part applies whether you have great, so-so, bad, or no credit. Regardless of how you currently manage credit and money, you can always learn something new and improve. Creditry helps you keep on top of all your credit lines and loans. If you have not opened any credit lines yet, you are in luck because it lets you learn how to deftly manage your credit cards and loans.

Check your credit. You can do this for free by visiting the federal government provided free credit report website. Every twelve months you can obtain a copy of your credit report from each of the major credit bureaus. That means you will have three copies to compare and contrast.

You can apply for preapproval online or by visiting your local branch of the bank. You typically need to already know what type of vehicle you want, so the bank can determine if it is willing to assume the risk for you to afford it. When you get the loan directly from the bank or credit union, you will obtain a true interest rate with zero markup.

Budgeting for Your Vehicle

Hopefully, you already have a written budget established. If you do not, you can start now. Visit Budgetry.com to learn how to make a budget and get started. You will learn nifty stuff like how to calculate what you can actually afford to spend on each category.

Here’s an example. Did you know that you should only spend 30 percent or less of your total monthly income on housing? Yep. It is true. If you make $2,000 a month, you should pay $600 or less on rent or house payment.

You will also learn about budgeting savings into your monthly finances. You should be socking away at least 10 to 20 percent of your monthly income. Bank it. See all the nifty stuff about budgeting there is to learn? You have to continue to pay your bills, save and invest while you make your car payments. (Bet you wondered how that all tied together. Now you know.)

Remember, it’s not only about buying a car, but you also need to keep the car going later on. If you need to pay for any unexpected repairs, you need to have money saved up for that.
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Applying for Your Loan

Okay. After all of that, you can apply for your auto loan.

Start at Loanry.com. No matter what your credit score, you can use this website to determine which lending institutions would most likely give you a loan.

Loanry does not lend any money. It just works like a shopping mall for loans. Lots of lenders list themselves on the site. They include items like the minimum credit score they accept. This lets Loanry match you with the institutions that may extend you a loan. There is no promise of a loan. Loanry just might reduce the time it takes for you to find appropriate lenders.

Final Thoughts

Got your credit in order? Found a loan? Good job. Go vehicle shopping. You may buy whatever you can actually afford. Pick something that gets good gas mileage and has a high safety rating. You’ll save money on your auto insurance.

You probably already budgeted for your auto insurance, but in case you forgot it, such a bonus that you are reading this before you even car shop. Remember that you will either pay for six months of car insurance all at once or it will become a monthly expense. Your good credit score will help you qualify for a lower insurance rate. Your choice of car will help, too. The higher your credit score, the easier you will find everything.

Enjoy your new ride. Hopefully, you can get behind the wheel without having to resort to dealer financing.

Drive Away Lease Buyout Auto Loans Explained

If you have leased your car and have fallen in love with it then buying the car at the end of the lease can seem like a good option. Lease buyout auto loans can give you the financing you need. There are some things you want to consider before you get a loan. Depending on the current fair market value of your vehicle at the end of the term, the agreed-upon price in your lease agreement, and the interest rate you could be approved a loan, these loans may be an expensive option.

The lease car will serve as collateral for the loan and this type of auto finance, which makes lease buyout auto loans secured loans. The amount of the secured loan will cover the lease balance, plus any applicable taxes or fees. Even though the loan is secured, there will still be requirements that you must meet to get the most affordable rate.

Why Lease a Car in the First Place?

Many people choose a lease in the first place because it’s cheaper than buying a car. Sometimes people are chronic leasers. They like to have the greatest and latest car as soon as it hits the market. So leasing can provide a degree of flexibility. And lease buyout auto loans can help people with the process if they want to purchase the car after leasing.

Leases usually have shorter-term loan agreements and run from three to five years. Many small businesses with limited capital can also choose to lease vehicles for the company. Lease buyout auto loans are also available for businesses that want to buy a car after the lease period ends.

There are a number of pros to leasing a car, including:

Lower Monthly Payments: If your monthly bill is a concern then leases give you savings in the short term. You may pay more interest but you will pay less monthly.

A New Car Every Few Years: Many people love the feeling of driving away in a brand new vehicle, and if this is you then leasing can be the way to go.

Worry-Free Maintenance: With new cars, you have a warranty that lasts three years. When you take out a three-year lease then it is likely that you will not have to pay for the repairs additionally.

Maximize Tax Deductions: If you are using your car for business purposes then a lease will give you more tax write-offs than a loan. This is because the IRS will allow you to deduct the financing costs and depreciation that are part of each monthly payment.

No Resale Worries: If you are the type of person who hates to haggle then you don’t have to worry about this with a lease.

Pros and cons of leasing a car

How Do Lease Buyout Auto Loans Work?

When your lease is up, you have a few options when deciding what to do with your car before figuring out lease buyout auto loans. You can extend the lease, return the vehicle, re-lease the car, or purchase it. You will need to check your paperwork to confirm your options because not all agreements will actually allow you to buy the car after your term ends. If yours does and you do want to buy the car but don’t have the money for it on hand then you need to secure auto financing with a lease buyout loan. You need to get the loan before the lease officially ends.

Before you apply for this type of loan, it’s important to read your lease agreement to learn what you need to do in order to buy the car. You need to let the leasing company know what your plans are ahead of time. Some banks, online lenders, credit unions, and financing companies offer lease buyout auto loans. These loans are similar to other types of car loans. Just like with every other loan, it’s important that you shop around for different options for lease buyout auto loans in order to make sure you are getting the best one for your needs.

Qualifying for Lease Buyout Auto Loans

Qualifying for lease buyout auto loans will be similar to other used vehicle finance options. However, there will be some unique requirements.

Good Payment History: Payment history is important in your current lease agreement. Until the account is brought current, you can’t get lease buyout auto loans and pay off or refinance any residual amount on the contract.

Good Credit: In order to be qualified for this loan, you need a prime credit score. This is usually a FICO credit score of 650 or higher. If the dealership submits your application and the lender declines you due to your credit score, you may have the option to find a co-signer.

Your Lease Terms: You may have to wait until the end of the lease before you can purchase the vehicle. If you do so earlier, you will need to get financing for the remaining payments and then you are financing more than the fair market value of the vehicle, which can lead to a higher interest rate.

Down Payment: You may need a down payment if the residual value of the vehicle is much higher than the fair market share. There will be very few lenders that will allow you to finance more than 100% of the retail value. With a down payment, you can bring this closer to the threshold where financing is allowed.

Titles: For titling purposes, you need to have it be titled under the same name for which it was leased. In some states, this can be changed with a release from the lessor or power of attorney.

Documentation: There needs to be documentation that is standard in all vehicle transactions. Including an insurance card, signed bill of sale, odometer statement, credit statement, and driver’s license.

There may not be any flexibility in the residual value and buyout amount. This was set at the original contract completion and was set high to allow for such low lease payments. While you may be able to negotiate, plan on financing this amount when you visit the dealership.

Determining the Market Value for Your Car

For lease buyout auto loans, one of the most important things is determining the market value of your car. The current retail price should indicate whether or not you should buy the leased car or instead purchase a different option. Determining the market value is actually a pretty simple process because there is so much information available online. You can use sites such as Kelley Blue Book, Edmunds, Cars.com, or AutoSite. Note that the price will vary from site to site so visit different sites in order to get a thorough idea of the car’s value.

If your leased car is popular on the market then the residual cost is likely lower than the retail price to buy a different car. In this case, buying out the lease makes more sense than purchasing a different one. The reality for many people is that the quote for lease payoff will be higher than the typical retail price. Many financing companies increase the residual price. So they can offer lower monthly payments for the people who leased the cars. The price of a used car has also gone down in recent times, which means that buying a different car can usually be the most affordable option.

How to Get a Lease Buyout Auto Loan

Leased cars will be considered used cars, which means that you will need to secure auto financing for a used vehicle. Typically, a used car loan will have a higher interest rate than a new car loan. Lease buyout auto loans may even have higher interest rates than used car loans as well.

Contact Your Leasing Company: Your leasing company may begin to get in touch with you at the end of your lease term. This way, you can discuss options and check your contract. Ask your leasing company any questions you may have about the end of lease cost, the car’s residual value, and fees associated with a buyout.

Shop Around: Some lenders for this loan offer preapproval. If you do get preapproved, the lender will let you know what you are able to borrow and what your loan terms and APR may be. Preapproval doesn’t mean that you automatically get the loan and it just gives you an idea of the terms. When applying for preapproval, know that you’ll need to share some personal financial information.

Preapproval can lead to a hard inquiry on your credit, which then lowers your score by a few points. You should be careful with timing since you don’t want to get a loan quote and have it expire. Most loan offers are only good for a month. Don’t apply for a loan too late. If you keep the car for a few days after the lease expires and you don’t buy it then you could face financial penalties.

Once Approved, Close on the Loan: If you have been preapproved then it’s time to finalize the paperwork and transfer the title. Talk to the lender, as well as your state’s motor vehicle department, in order to find out the next steps for transferring the title. Usually, the title will be in the name of the lender until you pay off the loan.


What to Consider with Lease Buyout Auto Loans

There are some things you should know before you apply for lease buyout auto loans.

Not All Lenders Offer These Loans: Whether you plan to borrow from a finance company, bank, or credit union, remember that not every type of loan will be available and the terms and rates very by lender. When you are shopping around, the first step you should take is to determine if the potential lender offers this loan because not everyone will.

You Could End Up Upside Down on the Loan: Knowing the current market value of your leased vehicle is important. You can get an estimate of what the car is worth with free online tools. If the car’s current market value is higher than its residual value then you may have equity in the vehicle. And it can make more sense to buy it. But if the situation is reversed then a lease buyout loan can put you at risk for being upside down on the loan. If you don’t make a down payment and end up financing the entire cost of the loan buyout then you could be borrowing more than the car is worth.

Interest Rates Can Be Higher: Leased cars are considered used cars so the loan interest rates are typically higher.

Calculating Lease Buyout Rates

Lease buyout rates will vary depending on what you will do with the buyout. If you have completed the lease and made the required payments on time then the residual value agreed upon at the beginning of the lease will be the amount due if you want to buy out the lease. When buying out a lease early, things are a bit different. In many cases, you need to make the remaining lease payments and then pay off the residual.

Statistic: Interest rates on auto loans in the United States from September 2017 to September 2019 | Statista

When Should You Buy Your Leased Car?

The buyout option on your lease may be an attractive option or it may be a way to control damage. The leasing company sets the purchase price at the beginning of your contract. If you are anticipating some extra penalties and fees then buying out the car can cut your losses. If market conditions have changed since you signed the lease then you can turn the hidden value in your car into some real savings. There are some instances where it makes sense to buy the car.

You Are Way Over or Under the Mileage Requirements: Most contracts are for 36,000 miles and three years. If you are over the mileage, you will owe money but if you are under then you are leaving money on the table. Why pay mileage penalties and have nothing to show for it? Buying the car can also save the disposition fee. This is the fee that is charged in order to prepare the car for resale. When you return a car that only has 10,000 miles on it and you paid for 36,000, it’s almost like handing the dealer money. Instead, buy the car and use the value you have paid for already.

The Car Matches Your Lifestyle: Sometimes, you need a different car at different points in your life. For example, if your kids are off at college, you likely don’t need to stay in a minivan. If your leased car still fits your lifestyle and you still like it, what’s the point of making a change and getting something new?

The Car Has Excess Wear and Tear: The car has a number of scrapes, bumps, etc. So, you could have extra penalties. However, if you buy the car then you don’t have to pay for the damage. And you can fix the issues on your own if you want.

You Can Negotiate a Reduced Buyout Price: When you buy your car, it saves the leasing company the cost of having to pay for auction and shipping fees. In some cases, this means you can negotiate a lower buyout price than what was originally specified in the contract. However, be careful since this negotiation may not be the best price. Because you are likely getting it at retail instead of wholesale. In order to negotiate a cheaper buyout price, you need to speak to the manager at your leasing company. He or she has the authority to approve the lower prices. It’s really a case by case basis and leased vehicles that are electric can sometimes have reduced buyout costs because of the low resale values those vehicles get.

Your Friend Will Want to Buy Your Leased Vehicle: If you buy the car and then you sell it to your friend, you have to pay sales tax. However, ask to see if the finance manager at the local dealership will do a lease pass through, which will match the leaseholder with a car shopper who is looking to take over the lease. In this process, the dealer buys the vehicle from you and then sells it to your friend. You aren’t charged any sales tax and the dealer also makes some money off the deal.

You Like the Car: If you like the car then check the buyout price when compared to the retail price. If it’s a fair deal then you can skip the dealership and send the leasing company a check. However, keep in mind you don’t have the bumper-to-bumper warranty protection. The powertrain warranty that covers major parts, such as the transmission and engine, may still be in effect.

When Should You Not Buy Your Leased Vehicle?

There are plenty of times it makes sense to get a lease buyout auto loan. But there are also times when it may not make sense.

The Car No Longer Matches Your Needs: Maybe you have moved and now you need a vehicle that is better for snow. Maybe you just had a kid and now you need more room for a car seat. If your leased car is no longer matching your lifestyle and needs then there is no reason to keep it. You can now move on to something that fits better in your current stage of life.

It’s Not Affordable: It may not be in your budget or affordable to buy your leased car. If your credit score went down, it could make the APR on your car that isn’t even new pretty high. You may be better off turning in the car and then buying an older used car.

If It’s Damaged: If the car was damaged due to a storm or an accident then it is considered that it is worth less than a car that is not damaged, even if was repaired. In a lease, you don’t own the car so the negative impact on this would be if you bought it so you shouldn’t buy in this case.

If the Vehicle Is Worth Less than What Your Contract Says: When you sign the lease then the car’s buyout value is set. Which means even if the car is worth less than predicted, you still have to pay the agreed-upon price. You would end up paying more than what the car is worth, which isn’t a great deal.

Higher APR: The APR you got when you leased your vehicle was partial because the car was new. When you buy the leased car, it’s now used. The APR can be too high for the car. And you may be better off getting a lower APR on a different vehicle.

Benefits of Buying Your Leased Vehicle

There are a number of benefits to buying your leased vehicle and having to get one of the options for lease buyout auto loans.

You Know the Vehicle. It’s okay to admit that you are in love with your car. After all, you drive it and you know whether or not it’s a good fit for you. When you buy your leased vehicle it means that you can continue driving the car you know and love.

It Can Be a Good Deal. This will be based on a case-by-case basis and it may not be a good deal for everyone. Be sure to do the math to make sure you are getting the best deal.

You Can Skip Fees. Buying your car outright allows you to avoid any penalties the dealer would charge. So you can bring back your leased car into sellable condition.

Your Car Is Still in Great Shape. If you have been meticulous about keeping your car looking like new and haven’t driven over the mileage allowance then buying the car can be a wise choice. Mint condition, low mileage cars are hard to find, even at the three-year point. Keeping the one you have can be a way to reward yourself for the upkeep you have done.

There Isn’t Any Haggling. While you do have the option to negotiate and haggle, you don’t have to. The price to purchase is already in the contract and, for the most part, that is a set option. If you want, you can close the deal without having to deal with any negotiation.

Take Advantage of Improved Credit. You have made your lease payments on time then. And if you decide to finance your purchase, you could be in for a good surprise. You may be able to get a better interest rate than what you had on your lease. And it can make the purchase more attractive.

Lease End Versus Early Buyout

Many people will wait to the end of the lease in order to buy the vehicle. However, depending on your contract, it could be possible to get one of the options for lease buyout auto loans and buy early. There are some disadvantages to an early buyout though.

Early Termination Fees: In many cases, there will be fees if you decide to end the lease early. These fees could be high depending on your contract. If you wait until the lease is up to buy the car then you won’t need to deal with these fees.

Higher Payments: Some people like leasing because the payments are more affordable. And it can get them in a new or better car they may not be able to afford otherwise. After a buyout, the payments can be higher. So waiting until the lease is over can keep the lower payments going for longer.

Taxes: When you first lease the vehicle, you have to pay the license and registration fees and taxes. Even though the car isn’t registered or titled in your name. When you buy your leased vehicle the license, title, and registration are changing. You have to pay for that all over again. The longer you can wait, the less the car is worth, which means all the fees will be less.

One of the reasons to do an early buyout is because of the penalties. The lease penalties can include going over the mileage allowance, damage to the car, and not maintaining the car properly.

Paying for Your Car with a Lease Buyout Loan

If you pick the lender that is the same one that leased the car to you then you shouldn’t have much to do. If it’s not the same then the new lender will send a check to the old leasing company. Or send you the check and you give it to them.

Leasing a car can give you a lot of benefits. With lease buyout auto loans, you can get the financing you need to purchase the car after the lease. There are some instances where it makes sense to buy your leased car. And other instances where it may not make sense. You want to make sure you shop around for the best deal, just like with any other loan. There may be different requirements for lease buyout auto loans. And you need to make sure that the lender you choose actually offers this option. While the option to buy the car in the middle of the lease may be available to you, it’s usually not a good financial option.

New Car Loans to Get You Moving

Buying a new car can be such an exciting time. The best thing about getting a new car is the smell. There is nothing like sitting in your new car for the first time and inhaling the smell of leather. It probably has so many new gadgets and features that you need to spend some time learning all about your new car. There are so many options available on the car market, it is hard to narrow it down to just one. There are some downsides to new cars and that is the new car loans.

All You Need to Know When Using an Auto Loan to Buy a New Car

Before you get super excited about your new car and start taking cars for a test drive, you must have a basic understanding of auto loan details. I know these are the details that no one really wants to spend time learning. However, it is important to learn some key facts about them. Auto loan shopping is a little different from shopping for a personal loan.

There are a few different sources from which you can obtain an auto loan. You can get financing, or a loan, directly from the car dealership, or a traditional bank, or a credit union. Or you could even borrow money from family or friends. You make a promise to repay the lender with regular payments, usually monthly. The lender charges you interest as a fee for allowing you to borrow the money. The lender selects the interest rate and it is based on your credit score. The better your credit is the lower your interest rates tend to be. It is important for you to shop car loan rates so that you can find the best one for you.

Auto loans are considered secured loans because the car you are buying becomes collateral for your loan. If you do not make your payments, the lender may take ownership of your car. You do not actually own the car until you pay off the loan. Most lenders require you to have full coverage auto insurance. They want to make sure you have full protection in case you are in an accident.

Can I Get A New Car with a Loan from a Car Dealership?

Just about every dealership has a finance department through which you can obtain a car loan. Most of the time when you finance a car through a dealership, the carmaker is who is actually financing the loan. For example, if you are interested in purchasing a Mazda CX 9, it is Mazda that is doing the financing. When you use the dealer to finance new car loans, it often makes the process easier for you. When you go through the dealership to get your auto loan, you do not have to do a lot of searching for the right loan. Often, the dealer has several different loans available and will give you their best offer, or give you a few from which to select.

The dealership handles all of the financing for you, so you really do not have to do anything, but sit there. Unfortunately, you may have to sit for many hours while waiting for all of the paperwork to process. While you may have to wait in the dealership for quite some time, all of the processing is finished in just one day. You also have the benefit of already knowing what type of vehicle you want and how much it will cost. There are a few other advantages to obtaining a car loan from a car dealership. Some of those benefits are special promotions that only the dealership can offer. Obtaining a loan through the dealership may also allow you to negotiate a better rate for the interest or a lower overall price for the vehicle.

Can I Negotiate An Auto Loan?

There are many car buyers that negotiate new car loans. There are some aspects of a car loan that you can negotiate and there are others that cannot be negotiated. It is key that you understand the difference. You can negotiate the interest rate and the terms of the loan. The terms of the loan indicate the overall length of the loan and may shorten the period that you are paying for the loan. When you shorten the period that you are paying for the loan, it decreases the amount of interest that you pay. You can also negotiate any warranties or upgrades for the vehicle. If you are trading in another car, you can negotiate the trade-in value, so you might be able to get more for the car you are trading in.

You cannot negotiate registration fees or taxes. These are set by the state so they cannot be changed. Remember, you do not know what kind of rate you can get for your auto loan until you ask. The lender may not give you the best offer upfront because they want to make money. You should always do comparison shopping when you can.

How Do Car Loan Payments Work?

There are a few things you should also know about car payments. The most important thing to know about new car loans is that you must be able to afford it. The lender is not giving you the money for your car as a gift. You must make regular payments. Those payments may be monthly or bi weekly. Most lenders will automatically debit your bank account for the money. If you pay bi weekly, you make half the monthly payment every two weeks.

You end up paying off the car about four months earlier because there are two months where you may three payments. Basically, if you pay monthly, you make 12 payments of $958 (using the example above). At the end of the year, you end of paying $11,496. If you make bi weekly payments, you make 26 payments of 479, which means you pay $12,454 at the end of the year. This way, you pay off your car sooner.

If you do not make your car payments, the lender will repossess your car. Your car is collateral for your loan and that means if you do not pay, they take your car. Do not think for one second that the lender will not come get your car. Ok, well, the lender will not, but someone working for the lender will. Not only will they take your car from you, but it will have a negative impact on your credit score. The bottom line is to make sure you can make those car payments. You do not want to find yourself in that situation.

Can I Decrease The Amount Of My Auto Loan?

There are always ways to decrease the amount of money you borrow for new car loans. You should make sure your credit is in good shape before you borrow any money. The better your credit score is, the lower your interest rate is going to be. The lower your interest rate means a smaller monthly payment.

Pay attention to how much money you borrow. If you only need a couple thousand dollars, then you should try to save the money instead of borrowing it. Small loans amounts tend to come with high interest. You can usually pay off a small loan quickly and the lender does not make as much on a small loan, so they charge more in interest.

You may want to consider buying a cheaper car. Cars often have a high price tags. Do you really need a luxury car that is going to cost you a lot of money? You should look at used cars to see if you can find one that will suit your needs. With a little research, you may be able to find a used car that has low mileage and was really want cared for by the owner.

Keep this in mind when you are deciding how much you are willing to pay each month for a car. The car only loses value; few cars increase in value once you buy them. You will never make back the money you spend on a car.

Can I Pay Off My Car Loan Faster?

There are quite a few ways to pay off new car loans faster. Cars are expensive and as a result, most car loans take six to seven years to pay. Lenders have increased the amount of time they allow you to repay because of how much they cost. When you are considering new car loans, keep these ideas in mind. I mentioned above that you can make your car payments bi weekly instead of once a month. Even if your loan is supposed to be repaid once a month, you can make two payments a month as long as you pay the full amount by the due date. If you make payments bi-weekly, it allows you to pay two more payments per year and save about $2,000 a year in interest.

You can also round up your monthly payment each time you make it. In the earlier example, the monthly car payment is $958.33. You can easily round that payment up to $1000 and you will save money on interest over the entire year. And you could save several thousands dollars over the course of a year. You can also make a large payment at least once in the year. Continue to make your monthly, but also make one large payment to help pay off your loan sooner. This can speed up the length of time you will pay off the loan.

Some lenders may allow you to skip one or two payments in each year, but do not do it. It increases the length of time it takes for you to pay off the loan. In addition, the interest increases during those months that you are not making monthly payments.

What Is Interest And Why Does It Matter?

The shortest answer is: interest is a fee given to you by the lender for allowing you to borrow money for new car loans. The higher the interest rate is on your loan means you pay more money per month. Your interest rate is dictated by your credit score. The lower your credit score is, the higher your interest rate will be. There are a few more things that you should know about interest. The actual amount you borrow is called the principle. The lender adds the interest rate on top of the amount you borrow. Lenders add interest at a higher interest rate to loans they consider high risk, such as to those who have bad credit. Loans that are lower risk are given a lower interest rate.

To highlight this, I will give you some numbers as an example. These are only examples, not real offers:

You want to borrow $40,000 for a car (it is a really nice car). And you have great credit, so the lender adds 5 percent interest. You would like the payments to be a little lower, so you opt for a 48 month, or 4 year, repayment period. 5 percent of the $40,000 you borrowed is $2,000. Remember, the principal amount is $40,000 + $2,000 interest = $42,000 you are borrowing. Your monthly payments are $875 (remember it is a really nice car). That is $42,000 divided by 48 months.

The same exact situation except with bad credit looks like this… you are borrowing $40,000 but your credit is bad and that adds 15 percent interest to your loan. 15 percent interest equals $6,000. So, you have a principle of $40,000 + $6,000 interest = $46,000 total. Your monthly payments are $958.33. That increases your monthly payment more than $83 per month.

You can see how quickly the payment jumps up when you have poor credit. I used an extreme example with a $40,000 car. The difference would be smaller if the total of the car was less.

Can I Use A Credit Card To Buy A Car?

You can use your credit card to purchase a car instead of new car loans, most of the time. Some dealerships may have some restrictions on using credit cards. They may let you use a credit card to purchase additional items or services for your car, but they may not let you buy a car. When you use a credit card to make a purchase, there is a fee for it. The dealership has to pay the 1 to 3 percent fee. Some dealerships do not want to pay that fee. They can make more money if you finance the car through them, so they require you to finance the car.

If you can find a credit card offering you a special promotion of 0 percent interest for a specified amount of time, a credit card might be a good idea. It is only a good idea if you can pay off the credit card before the time period ends. Otherwise, you could be charged for all of the interest. It could be a really large amount to put on your credit card and could cause you to have high payments, which may be higher than new car loans. And it could also negatively impact your credit score as it increases the balance you are carrying on your card. It also increases your debt to income ratio. You should really carefully consider if using a credit card is the best idea for you. Just because you are able to do so, does not mean you really should.

Should I Budget For My Car?

It is always a good idea to create a budget, not just for new car loans, but in general. A budget gives you an accurate idea of your income and your expenses. Many of us have no concept of how much money we spend each month. We do not even realize where we are spending most of our money. The best way to determine those things is to create a budget.

I know few of us really want to create a budget. It can be time-consuming. It can also be an eye opener for you when you realize how much money you spend each month. However, it also can be the greatest gift that you give yourself. It puts you in the driver’s seat and gives you control of your finances. While it may be challenging to start, ultimately it is the best thing you can do. It teaches you where you need to make cuts in your spending. You also learn what is most important to you and what you are willing to compromise. If you want to create a detailed budget, that can certainly take some time. You can create a quick start budget for yourself to give you an idea of where you should make cuts.

You can list all of your monthly income in one column and list your monthly expenses in a separate column. Then you add both columns and subtract your expenses from your income. Hopefully, you have a positive number. If not, you definitely need to make spending cuts.

Can I Save Money To Buy A Car?

You can absolutely save money to buy a car. You should already have a plan for saving. If you want to save money for a car, it should be additional savings. It should not be your only savings. While it may be better to pay cash for a car instead of taking on a loan, it is not smart to take all of your savings to pay for a car. You do not want to leave yourself without any savings. In that case, it makes more sense to obtain a loan.

However, if you want to create a separate savings budget to purchase a car, there are most likely places you can make changes in your budget. You should look for quick and easy places where you can make changes. Look for places where you are spending money for items that you are not using. Many of us have that gym membership that we are not using. If you have one, too, that you are not using, cancel it. You should cancel it right now. That is a complete waste of money. It is an easy way to find some savings.

The money that you would pay for the gym, immediately begin putting in a separate account. Now, you can look for other areas where you are spending money for items you do not use. Do you pay for any subscription services? If so, do you really need them? Do you need to receive them as often as you do? Do you have a stockpile of whatever items you have automatically shipped because you really do not need them as often as they come? It may be better if you take control of your subscriptions. This way you order them and pay for them only when you need them, instead of when they are shipped.

Conclusion

When considering new car loans, it is important that you know how to shop for a car loan. It is also important that you find the right one for you. The right one is the one that you can afford to repay. It is a really nice feeling to get a new car. It fills you with a sense of pride to sit in your new car. However, you must remember that a new car comes with a new car payment. There is nothing worse than the feeling of having your new car taken away from you. Before you consider what car you want, consider the car payment. The first step you should take is making sure your car payment fits into your budget.