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.

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.

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.

Getting a Car Loan with Bad Credit: Money Speed Bump

My poor little car is pretty much on its last leg. Sometimes I get in it and it simply will not start. The heat and air recently went out. There are some issues in the wheel well and the brake area. I could go on with this list, but the bottom line is that I try not to drive any farther than I am willing to walk back.

We bought the car used in February of this year, so we have had it less than a year. I have nothing against used cars as a whole- in fact, I have only ever owned used cars- but this particular one had not been cared for at all by the previous owners.

About a week after bringing it home, we knew that it was going to cost more to fix it than replace it. I have known it needs to be replaced, but I honestly hoped it would at least last until tax season. I am thinking that is not going to happen. Now, I am faced with finding a new car with nothing saved and credit that leaves much to be desired. Sound familiar? We are in this together, so let’s figure out how to get a car loan with bad credit.

Basics of an Auto Loan

An auto loan is like every other loan- you borrow money, you get what you need, you repay the loan. Also like every other type of loan, there are pros and cons to it. These should be considered carefully before rushing to get a car loan with bad credit.

Pros

  • You have your car almost immediately. Unlike saving to buy your car, you can drive away with the car as soon as the money comes through and paperwork is signed. This could simply be a matter of minutes or hours.
  • Drive now and pay over time. Again, you do not have to wait to purchase. You can be driving the car the entire time you are paying on it. This is always a bonus, especially if it is going to take you a long time to save enough for the purchase.
  • You might be able to afford a nicer vehicle. With an auto loan, you may get approved for more than you could save. This means that you could typically purchase a better vehicle than if you simply paid outright.

Cons

  • It is a debt and you are at the mercy of a loan and lender. Without being too dramatic, lenders and debt are a type of prison, in my opinion. The lender may be a very nice prison warden, but you are still a captive of that debt until you pay it off. Debt can affect a lot of your life, including your mental health.
  • You might be tempted to over spend. Since you may get approved for more than you could save, you may be tempted to buy a more expensive car than you can afford. Before even applying for a loan, you need to determine how much you can afford every month. Whatever that amount is should be what you stick with. Otherwise, you are putting unnecessary stress on yourself.
  • You risk losing the vehicle. While you owe the loan, you are at a potential risk of losing that car. If you do not make your payments, they have the right to repossess it. This does not typically happen on the day after you are late. Nobody really wants to repossess your car because that is just something extra for them to deal with. They would much prefer that you just pay the loan, so you probably will not lose the car right after missing one payment. However, this is the lender’s business. If you do not pay, they are losing money, so they will not let you go forever without payment. If you continue to be late on your payments and have a delinquent amount, you just might find yourself without a car on top of losing any money you have put into it.
  • It may require additional insurance. Most lenders require you to carry full coverage insurance while you owe the loan. This is to make sure that their investment is protected. Closer to the end of the loan, they may drop this requirement, but expect it for the majority of your loan term. The cost of this insurance should be factored in to how much you can afford to pay each month.

Car Loan with Bad Credit: Is It Possible?

It is most certainly possible to get a car loan with bad credit. The issues tend to come in with the loan rates and terms. It will also limit where you get financing.

How to Shop for a Car Loan with Bad Credit

When you know how to shop for a car loan, you can get a much better deal. While it is most definitely possible to get a car loan with bad credit, you can expect to put in more work than someone with good credit. Not all lenders will provide loans to people with bad credit. Those that do may require high monthly payments or charge ridiculous interest rates, so you really have to look for a good car loan with bad credit.

Auto Loan from Financial Institution vs Dealership Financing

The first thing you should know is that there are two basic types of auto loans. One is financing from the car dealership. The other is financing from a completely separate financial institution. Each will have different credit requirements, terms, and so on. It is not possible to say which one is better without knowing what each is offering, but you should know what to pay attention to. The interest rates should play a large role in your decision.

The Effect of Interest Rates

When you are trying to decide between the two, obviously the price of the car itself matters along with the interest rates. Sometimes interest rates can be so close to one another that you think it will not make much of a difference. That is not true. Let’s say you are buying a $15,000 car. This is what different interest rates would look like:


10%= $1500
12.5%= $1,875
15%= $2,250
17.5%= $2,625
20%= $3,000


These are simplified and fictitious numbers, but hopefully you can see what a big difference interest rates can make. It is incredibly important to shop car loan rates. When you are carrying out your auto loan shopping, choose the loan with the lowest rate possible, even if it is only 1% cheaper than another. Of course, you want to weight this amount against other factors, such as the repayment length, but most often, the lowest interest rate will provide the best option.

Wouldn’t it be great to have a mall where you can shop for loans? Wow…that would be so awesome…what? There is?! You’re right here! Loanry is the place you’ve been waiting for.

How to Get a Car Loan with Bad Credit AND Low Income

Many people wondering how to get a car loan with bad credit are also wondering how to get an auto loan with low income. While this does pose an additional- but very common- problem, you do not have to give up. You will just need some additional planning, saving, searching, and that kind of thing. There are places that will work with you, even with low income. Be prepared to take some time to really search, though, so that you can get a loan with good terms and rates.

Choosing the Right Car Loan with Bad Credit

We already talked a bit about interest rates. That should be a deciding factor in which loan to choose. However, choosing that loan is simply where it starts. You must also consider how the loan will affect you while you are paying on it.

Consider Your Situation and Lifestyle

As a freelancer, my income ebbs and flows. Some months I make excellent money, and some months not so much. Knowing this means that I have to really consider financial decisions I make. I cannot make any of those decisions based off of my great months because those do not happen consistently. Instead, I factor in the bad months and the mid-range ones. I would prefer to know that I can make the payment even at the worst times than to risk it.

What about you? Are there any special considerations you need to make? Do you have the type of job where you only work a certain amount of months out of the year, i.e. seasonal or oil related jobs? Are your finances already stretched so much that they are about to snap? Do you want to take a month off this year to write your novel or take care of your parents? If there is anything like this, you have to factor this into your decisions or you will end up worrying about how to make payments.

Alternatives to a Car Loan with Bad Credit

Obviously, paying cash for a car would be awesome, if it is possible. Pick up extra shifts at your job, pick up a side job, anything you can do to put some cash away. With patience and diligence, you might be able to pay cash for a car cheaper than you think.
You might not be able to afford to pay cash for it, but maybe a family member will pay for a cheap used car up front and allow you to pay them back.

They might also be willing to cosign with you so that you can get a much more favorable interest rate. Though both of these options are still technically a loan, they will be much better than getting a loan with bad credit.

How to Decrease the Amount I Need to Borrow

One of the best moves that you can make if you must get an auto loan is to decrease the amount you have to borrow. The less you borrow, the less interest you owe. It may require some extra work in the beginning, but it can save you a lot of work down the line. Get creative with ways to save, as there is always a way. Here are a few factors to consider as you do:

Consider Used VS New

Many people have an issue with used cars, and to some extent, I can understand it. There are some who simply have too much pride to be seen riding around in a used car, or they just have to have a new one. If that is you and you can afford it, you can get all of the new cars you want.

Many people reading this though are reading for the purpose that they cannot afford it, at least not all at once. If this is you, join the club. Very few people can simply pay for a new car out right. Let’s consider the numbers to prove my point.

In 2018, there was a total of 27 million new auto loans. And as of March 2019, Americans owed $1.16 trillion. Unless all of these people are taking out these loans for fun or simply because they do not feel like paying it all at once, this shows that the majority of us need help buying a car.

Now, let’s consider the difference in new and used. You can find used cars for less than $10,000- much less. In fact, one of the best cars I have every owned was a cute little Toyota Camry that I bought from an elderly couple for $1,200. They had been the only owners of the car and had taken good care of it. The only reason I got rid of it is because I found out we were pregnant with our fourth child, and- as much as I wanted it to- it could not fit the six of us. We upgraded to an SUV that could fit us all.

As far as purchasing from a used dealership, I have done this, too. In fact, the SUV we upgraded to was a 2001 Chevy Suburban that was $8,000. Our payments were $300 per month for two years. We ended up paying for one year, then paid it off the next tax check we got.

While we were paying this, a friend decided to buy a new car. She went to a dealership and signed the paperwork for a $30,000 car. Her payments were nearly $600 per month and she would be paying for five years. That payment is more than we were paying in rent at the time for a pretty nice house. Yikes!

Additionally, we only needed $1,000 down to drive the Suburban off the lot. I do not remember the exact amount, but she had to come up with three or four times that much. Call me cheap, but if I am going to have to come up with thousands for a down payment and pay $600 per month, I would prefer to do so to buy a house, not a car.

One reason people are against used cars is that they are not always in great shape. While used cars may not always be the best solution, they often are much better than you might expect. If you are concerned about a used car, take it to a mechanic during your test drive. They can tell you if anything is wrong. Many used car lots will fix most problems while you are making payments. If they do not, you can always negotiate on the price if there are any problems.

Another idea is to look for a used car through a rental car company like Enterprise. At regular intervals, they replace “old” cars with new ones. Though their idea of old and mine are a bit different. The good thing about these cars is that they have been taken very good care of, so they tend to be a good investment.

Save for a Down Payment

A great way to cut back on your loan or financing amount is to put down the biggest down payment you possibly can. Even if you can only come up with $500, that is $500 you do not need to borrow or pay interest on. If you can put off purchasing your car for a few months or more to allow you to save, this will be a great way to go.

Make Some Quick Extra Cash

If you cannot wait months to purchase your car, you can still put down a nice down payment by making some quick cash. The ways to do so are only as limited as your creativity. But a great ways is through having a yard sale or two. Everyone who knows me or has ever read any of my advice knows that I am a huge advocate of yard sales. This is because I know that they work and they have multiple benefits, the biggest of which is that you get to clear out your house and make some money for doing it.

Take a run through your home. Throw everything in a box that you do not use, do not want or like, have used as much as you think you can, have unnecessary duplicates of, and so on. Then, go through your home again to do the same. Sometimes you do not notice things the first time, but notice them later.

It can often be tempting to think, “No one is going to want this stuff.” But one man’s trash really is another man’s treasure. You never know who is on a tight budget and will be more than happy to pay you $3 for what you consider an old pair of jeans. You never know what single mom will gladly pay you a couple of bucks for pens, scissors, glue, and more to save money on school supplies.

That is another thing I love about yard sales. Not only does my family and my home benefit, but so do others. During some yard sales, I have met some people truly in need that I have been blessed enough to pass things on to for no charge. If this seems counterproductive to making money, you must not understand the laws of sowing and reaping, karma, or whatever you choose to call it. Basically, when you help others, help somehow finds you, so giving is investing in yourself and others.

Be sure to advertise your yard sale, even if it is just on Facebook. Take pictures of some of your items to go with the post. Trust me when I say that some people absolutely live to go to yard sales and markets on the weekends. Price your items fairly so both you and your customer can benefit. Be willing to cut down on your prices, especially if it is getting later in the day.

If you have a lot of clothes, consider a $5 bag sale. This is my favorite thing to do. I always have piles of clothes. Trying to get rid of them one piece at a time almost always means I have to pack most of them back up. Instead, I hand my customers a grocery bag and say, “Fill it up for $5”. They stuff the bag so a lot of clothes are moving out, and I make some money. Try it yourself. You might just come away with a hefty down payment for your car.

Getting a Car Loan with Bad Credit to Build Credit

If you have had to get a car loan with bad credit, you probably wish your credit was better. Though there may not be a lot you can change this time, you can use this experience to make it better in the future. It is absolutely possible to build your credit with a car loan, if you handle things the right way.

The right way basically means that you pay your payments on time. While it may be a struggle, we have some advice for you: budget- my other favorite financial advice. Think about it: how are you going to pay something that you do not know when to pay, how much to pay, or where the money will come from? As much as I wish they did, bills do not just take care of themselves. You actually have to put the work in.

The first thing to do, in my opinion, is to put the payment date in or on something that you cannot ignore. This will differ depending on your preferences. If you are more of a paper and pen person, write “Car Loan Due” on every monthly page of your wall calendar on the correct date. If you are more of a digital person, type it up on your Google calendar and set it to repeat every month.

Next, set aside a day each month to sit down and plan out your bills. You should have the dates all of your monthly bills are due down on something. If you do not, now is the time to do so. Use this to determine how much needs to come out of each check to go to your bills. If you see you will not have enough for any of your bills, including your auto loan, find a way to make some extra cash then- not the day before the bill is due.

If- after all of your planning- for some reason you will be late on your payment, call your creditor. It is much better to speak with them and let them know what is going on than to hide from it. More often than not, they will try to work with you, which means the late payment may not show up on your credit report.

As long as you are making your payments on time, you should see an increase in your credit score. If you have purchased from a used car lot that does not normally report to the credit bureaus, you can still often use your receipts or some type of statement from them and report it to the credit bureaus yourself. It takes a little more time and effort on your part, but it is well worth it.

How to Establish Credit History When You Have No Credit History?

Conclusion

When you decide that it is time for a new car, try not to jump too fast into a situation. That is when mistakes tend to happen. All financial decisions, including getting an auto loan, should be carefully considered prior to signing on the dotted line. When shopping, simplify your work by using a platform that brings lenders to you. This will help you compare them more easily, and probably discover some you did not even know existed.

The Car Loan Process that Moves Fast

A record seven million Americans are at least three months behind on their auto loan payments. While Americans have been borrowing to buy cars for decades, auto debt has increased considerably since the financial crisis. A good number of consumers find it challenging to make their loan payments on time as a result of going for the wrong loan product. This is why it is necessary to get to know the car laon process. And compare the different options available before taking out a loan. In the end, you will be sure that the loan you go for is right for your needs.

Buying a car makes for a huge investment. Whether you are planning to buy a brand new or used vehicle, it is important to do due diligence before making the purchase. If you are contemplating financing options, you will need to understand the car loan process. This means familiarizing yourself with issues such as interest, prepayment penalties, other charges as well as the consequences of defaulting on these loans. It is also important to educate yourself on ways of ensuring the loan process moves fast. Below is part of the information you need to know about how to get an auto loan.

What Is a Car Loan?

Purchasing a car is a big and important financial decision, making it important to plan ahead. One of the factors you will have to think about is how you will finance the purchase. Considering the high price tags with which cars come today, a significant number of prospective car owners turn to vehicle finance. However, before entering any financial commitment, it is essential that consumers understand what these loans are and how they can affect their financial health.

Simply put, a car loan is a type of personal loan whose proceeds are used to purchase an automobile. In other words, a lender gives the borrower the money they need to purchase a vehicle. The borrower, in return, agrees to repay the loan amount plus accrued interests in equal monthly installments until such a time that the amount owed is paid off in full. While most personal loans are usually unsecured and are issued on the basis of the borrower’s trustworthiness, car loans are a bit different. These loans are almost always secured, with the vehicle to be bought serving as collateral. This means that the lender can repossess and sell the vehicle to pay off the loan debt in the event that the borrower fails to make their payments.

There is a lot that you need to know about the car loan process when considering it as an option to finance your vehicle purchase. This information will go a long way in helping you compare different lenders based on their terms. In the end, shopping for auto loans will help you make the best choice.

Ways to Increase Your Chances of Getting Approved

After preparing to apply for vehicle finance, it can be very frustrating if your application is rejected. Similarly, the excitement that comes with the prospect of owning a car means that you will want to see the car loan process moving fast. Below are some of the ways to increase your chances of getting approved for a car loan.

Borrow What You Will Afford to Pay

Generally, lenders are likely to offer you the amount you need if they establish that you will be in a position to afford to repay. Taking out an amount that you will pay back comfortably will also help you maintain your financial health. It is important to consider your income level, debt-to-income ratio, and the monthly repayments.

Raise Your Income

With the important role that income plays in determining whether you qualify for a loan, you should consider working on ways to increase your income. These include doing a second part-time job, engaging in a freelance business, or getting a side hustle. This will go a long way in ensuring that you can afford the loan you want to apply for.

Put Up Collateral

One of the common reasons why lenders will decline your application is because they see you as a risky borrower. Putting up some form of collateral as security for the loan will offer security for the loan. Since almost every car loan process uses the vehicle as collateral, you should find out if you can include another asset in order to get approved.

Make a Down Payment

You can also consider exploring the option of making a down payment. A down payment will reduce the amount of money you borrow, a factor that will ensure you repay the loan without additional pressure on your wallet.

Request a Meeting with the Loan Officer

A face-to-face meeting with the loan officer will give you a chance to show important personal information that is not captured in your credit report. Knowing how the car loan process works will also help increase your chances of getting approved. It is essential to apply for loans that you know you qualify for.

Paperwork to Bring With You

Bringing accurate and complete documentation to your meeting with the loan officer will help to make the car loan process fast. While your credit score will show your repayment of credit card debt and other loans, it does not include your bills, monthly mortgage or rent or payment of private loans. You will need to prove that you have a source of regular income on a regular time cycle. This is why you should carry with you paychecks from all the jobs you maintain.

Evidence of your other income streams will demonstrate your ability to repay the loan in the unfortunate event that your employer reduces your hours or terminates your employment. You should remember to carry statements from your checking account, stocks and bonds, certificate of deposits, savings account, and retirement fund. In case you receive supplementary income such as alimony, veteran’s benefits, or child support, you should include documentation to show that.

The best way to know how to get an auto loan is to do your research. The information you gather in this way will make it easy for you to know what to expect and how to prepare for the process. You will also understand the different documents that are required by your lender of choice. Today, there are numerous lenders in the market, each offering different interest rates on their auto loans. When you are shopping car loan rates, you can work with a third-party that is not in the loan business. We make it easy for you to find a lender that will help you meet your financial needs.

Advantages of Auto Loans

A car loan, just like any other lending product, can have a positive impact on your life if managed well. However, mishandling can result in financial and emotional stress. This is why it is important to not only understand the car loan process but also know the pros and cons of these loans. Here are some of the advantages of car loans.

Flexibility

One of the advantages of auto loans is that they offer consumers flexibility; allowing you to buy a vehicle now and pay for it over a period of time. This is important for buyers who cannot pay for the car upfront but will afford to repay a loan in monthly installments.

Future Savings

Financing a new car helps you avoid the problems associated with purchasing a used car just to avoid having to take out a loan. A new car is likely to offer better fuel efficiency and fewer repairs, helping you not only save money but also enjoy peace of mind.

No Collateral Needed

Generally, you will not need collateral to get a car loan. In most cases, the car you want to buy will serve as the collateral for the loan. In case you fail to pay the outstanding balance, the lender can seize the car and sell it to repay the loan.

Improved Budgeting

Depending on the agreement you reach with the lender, you will have a chance to decide how much you will be paying every month. This ensures that you do not overspend or have to make adjustments in other areas of your life.

Build Your Credit Profile

A car loan, just like other types of loans, gives you an opportunity to improve your credit score. However, you must ensure that you make all the payments on time. In order to do this comfortably, you need to shop car loan rates to find a loan that you will afford.

Disadvantages of Auto Loans

There are a number of short-term and long-term problems that vehicle financing can pose. It is necessary to know about these problems and identify ways of avoiding them.

Paying Interest

A car loan will require you to pay interest on top of the principal amount you borrowed. Although your interest will depend on several factors, it will push up the total cost of the car. In case you have poor credit, you will end up paying even more in total cost, a factor that could have an impact on your budget.

Financial Implications

When it comes to car financing, there is always the temptation to bite off more than you can chew. Once you are at the dealer’s showroom, you can be tempted to buy a car that is more expensive than what you can afford. While you can make a few adjustments to your budget, this may hurt your long-term financial outlook.

Insurance Considerations

Most of the people who finance a car go for relatively high-value vehicles. This means that auto insurance premiums are bound to be higher. The lender may also require that you carry higher liability and physical damage coverage to ensure the vehicle and their interests are protected.

Possible Repossession

A simple understanding of the car loan process will reveal that the lender will have the right to repossess the vehicle if you default on payments. This will not only force you to find a new way of moving around but will also have a negative impact on your credit history, making it more difficult for you to access funding for a considerable number of years.

Factors to Consider before Taking Out a Car Loan

It is normal to be excited at the prospect of buying a new car, especially if you are about to buy your first car. However, it is important to keep a level head to ensure that you make sound decisions. Beyond being familiar with the car loan process, here are a few things you should keep in mind before taking out a car loan.

Car Loan Rate

This is a critical aspect to consider since the interest rate will affect the amount of the loan as well as your monthly repayments. Make sure you do your research and read the fine print before committing to a contract.

Credit Score

Most lenders will look at your credit score to determine your risk profile. While a high score can help you enjoy lower interest rates, a low score might get you rejected. It is important to work on improving your credit score if you are to increase your chances of being approved for a loan.

Fees and Charges

Apart from the interest, there are other fees and charges that affect the cost of borrowing. You should find out about fees such as discharge fees, establishment fees, and late payment fees. Since these fees vary from lender to lender, you should do due diligence before taking out a car loan.

Loan Term

As a borrower, you have the capacity to choose how long you want to repay the car loan. However, you should remember that a longer loan term will see you paying more in interest despite offering cheaper monthly repayments. This applies to any car loan process.

Car Loan Repayments

Another critical factor to consider is the amount you will be expected to pay back every month. This will help you determine whether you will be able to afford the loan. You will need to input the value of the vehicle, loan term, interest rate, deposit, and balloon payment in a car loan calculator to arrive at this figure.

Balloon Payment

A balloon payment is a lump sum that is paid to the financial lender at the end of the loan term. This ensures that the monthly repayments are lower, helping to make the loan affordable during that period. However, you will have to pay the loan in full once the loan term ends.

What to Know When Financing a Car

When you apply for a car loan, you will be getting the car itself and the loan for the new vehicle. The key to ensuring that your experience is rewarding is knowledge. As such, you should know all the important issues about the car loan process.

Determine Your Budget

The first step would be to create a budget. Once you know the type of car you want and how much it costs, you will be in a position to determine the loan amount you need. This will go a long way in helping you plan properly for your needs and the monthly repayments.

Choose Between Used and New

Although this may seem like a no-brainer, it is one of the most commonly overlooked issues. The choice you make will have a huge impact on the purchase price, repair costs, the cost of maintenance, depreciation, and the condition of the vehicle.

You Can Negotiate a Lower Interest Rate

What most people do not know about the car loan process is that borrowers can negotiate for a lower interest rate. A good number of dealers who offer in-house financing will be willing to offer you a lower rate depending on your credit score and down payment. Negotiating a lower interest rate will help you save a significant amount of money.

There Are Other Ways to Pay for a Car

Apart from car loans, there are other ways to pay for the car you want. Even as youare shopping for auto loans, you should take time to consider other options. Using your savings, borrowing from a credit union, or borrowing from family are some of them.

Direct Lending Versus Dealership Financing

There are two options available to lenders seeking vehicle financing. While direct lending involves getting a loan directly from the bank, dealership financing entails getting a loan through the dealership.

Car Loan with Bad Credit

During the car loan process, a borrowers’ credit score will have an impact on how much they qualify for as well as the interest rates they pay on the loan. As such, you should work on improving your credit score before taking out a car loan. However, if you have poor credit but do not have time to improve it, you can apply for car loan with bad credit. The good news is that there are several steps that you can take to ensure you get a car loan with bad credit.

Look Over the Credit Report

There is a chance that your low credit score is as a result of errors and oversights in your credit report. Before applying for loans for people with bad credit, you should look over the report to establish whether there are any errors. In case of errors, you should get them rectified to increase the loan opportunities you can enjoy.

Get a Co-signer

If you have poor credit, you can consider getting a co-signer. This should be someone with a better credit score than you. The co-signer will repay the loan in case you default. Lenders see this as security for the loan. So it’s a factor that can help you get a car loan faster.

Look at the Overall Loan Terms

Rather than simply focusing on the monthly payments you will be required to make, borrowers should look at the loan terms in their entirety. The loan term and interest rates will also have a significant effect on your finances.

Do Your Research

Today, there are lenders who offer bad credit loans to people who cannot be approved by traditional lenders. A little research will help you find lenders who can assist when you have poor credit. However, just with other types of loans, you should look into different rates to ensure you get a favorable deal. Make sure you are connecting only with reputable lenders.

Dealing with Future Car Issues

Beyond knowing how to get an auto loan, you should also be aware of the car issues you are likely to deal with in the future. Whether you buy a new or used car, there are several expenses that come with ownership. In order to be safe, you should take the necessary steps to minimize car trouble and reduce the impact it has on your life and finances.

Regular Maintenance

If you are a first-time car owner, it is important to familiarize yourself with the various maintenance issues you will have to deal with from time to time. Ignoring basic and regular maintenance can cause a lot of trouble, leading to inconveniences and higher expenses. It is advisable to have an emergency fund. This will allow you to take care of any unexpected issues that may come up.

Maintain Insurance

Most of the lenders who offer car loans will require that you purchase the types of insurance coverage that will protect their interest in case of damage to the vehicle. You will also need to buy insurance that covers some of your car issues. Since you will have to make sure that your insurance is paid and up to date, you should shop around for the best rates before choosing an insurance provider.

Carry a Few Essentials

Once you have bought your car, there are a few essentials that you will need to be carrying with you. Some of the most important items include a spare tire and a portable battery charger.

Final Thoughts

Even as you think of ways to ensure a successful car loan process, you should be ready for the challenges associated with car ownership. In case you really needed the car, there is a good chance you will get value for your money.

One of the important things to do before applying for a loan to purchase a vehicle is to learn about the car loan process. However, once you have gone through it, obtained the money you need, and purchased your car, you should remember to make all loan payments on time. You can do this by setting up auto-pay, putting it on your calendar. Or controlling spending, and going for debt consolidation if you have trouble making the monthly payments consistently. We make it easy for consumers to find a lender. This helps to save you time and offer you the convenience you need. The next time you are looking for a car loan, kindly consider working with us for a hassle-free borrowing experience.

Should You Use a Personal Loan to Buy a Used Car?

Most of us live in places where we need a car to live. There are some cities, like New York City, where the public transportation system is amazing and the best mode of transit. It gets you where you want to go much faster than a car. Unfortunately, not all cities follow their lead. I live in a city where the public transportation system is seriously lacking. If I did not have a car, I would not be able to go anywhere. Most of us cannot afford to pay for a car in cash, so that means we need auto finance, usually in the form of a personal loan. Let’s dig a little deeper into what it means to get vehicle finance and if you really should.

What Is A Personal Loan?

A personal loan is when a lender of some type allows you to borrow a certain amount of money. You promise to repay the money in regular monthly increments for a set length of time. A personal loan has interest attached to it. Interest is what the lender charges you to borrow the money from them. The amount of interest is based on your credit score and other factors like income. A personal loan can be used for any purpose that you would like. There are some loans called out for special purposes, but in reality, you can use it as you choose.

Can I Use A Personal Loan to Buy A Car?

Yes, you get use a personal loan for just about any use. There are some personal loans specifically for purchasing cars. There is a major difference between a personal loan and an auto loan. An auto loan requires the borrower to use the vehicle as collateral. If you default on the loan, the lender can take possession of the car. A personal loan is an unsecured loan. That means, if you use a personal loan to buy a used car, the lender does not use the car as collateral. When you are buying a car from an individual, it makes sense to use a personal loan. If you do not want full coverage car insurance, you should get a personal loan instead of an auto loan. When using a loan to auto finance using a traditional auto dealer financing, the lender makes you have full coverage insurance.

Personal Loan Shopping

Should I Buy A Car?

Obtaining a personal loan to buy a used car, or even a new car is a big deal. Cars are expensive and the cost only continues to rise. It is also expensive to maintain an older car that needs constant repair work. When considering if you should buy a car, there are some questions you should answer. Why do you want to purchase a car? Can you afford to purchase a car? I am going to focus on the first question here. We will talk about the second one further in the post.

In some cases, you need a car no matter what. Other times, maybe you just want something new, or you are tired of fixing your current car. The costs of car repair can easily creep into the thousands. Your current car may not even be worth the cost of the repairs. You really need to weigh the cost of the repair against the value, monetary and emotional, of the car. You should consider how often are you repairing the car. Is this a once every couple of years cost? Or are you sinking hundreds to thousands of dollars into it every few months? Only you can determine the best course of action but answering those questions can provide guidance.

What Are The Advantages To Getting A Loan to Pay For A Car?

There are some advantages to obtaining a personal loan to buy a used car. If you live in a place where public transportation is limited, you need a car. A loan can help you purchase a car when you do not have the cash. Let’s face it, few of us have the cash to pay for a car. If we did not take out a loan, we would not be able to afford a car. If you obtain a personal loan to pay for a car, you are not subjected to the same parameters as when you get an auto loan. When you get credit for a used car, the lender wants you to have full coverage auto insurance. You also must use the car you are purchasing as collateral.

What Are The Disadvantages To Getting A Loan to Pay For A Car?

So, let’s be honest here. The major disadvantage of a personal loan to buy a used car is more debt. Americans are drowning in auto and other debt and it continues to rise each year. The reality of a car is that as soon as you drive it off the car lot, the value goes down. With a few exceptions, cars do not retain value and will never be worth what you pay for them again. As mentioned above, they are expensive. Your loan payment could be anywhere from $300 to over $1000. That is a large chunk out of your budget. It may not be one you can afford. You may find yourself in a position of just buying the cheapest car you can afford. You may get stuck paying hundreds of dollars per month for a car you do not even like.

If I Do Not Pay Back My Loan, Can I Lose My Car?

When you use a personal loan to buy a used car, it is an unsecured loan. That means that you do not have to use your car as collateral. If you do not pay a personal loan, the lender will find ways to collect on the loan. However, they will not take your car as a result. If you obtain an auto loan, the car you purchase becomes collateral. That means, if you do not pay the loan, the lender had the right to take you a car. Believe me, they will. Lenders do not mess around when it comes to getting their money.

If you do not pay your bill, they will repossess your car. Often times, it happens in the middle of the night. If you know you are not able to pay the loan, the best thing to do is contact the lender and try to work with them to make different payment arrangements.

Does My Budget Really Matter?

Yes, your budget is one of the major factors in deciding on a personal loan to buy a used car. You need to be able to fit a personal loan into your budget before you decide to use one for anything. You should take a hard look at your budget to make sure a car payment fits. Considering to buy a car is not a decision that should be made lightly. If you cannot afford to pay the car payments each month, you are setting yourself up for failure.

You could lose the car. You could impact your credit. You may not be able to get another loan. That is a situation you do not want. The first thing you should do is use a budget app to determine how your finances look. Determine how much money you bring home each month and how much you pay out in expenses. The amount that is left is what you might be able to pay for a car payment.

How Can I Budget For A Car?

Once you see your monthly expenses listed, you can begin to make adjustments. Often times, we do not even realize how much money we spend in a month until we write it down. Begin to eliminate unnecessary expenses, such as that gym membership that you are not using. You can also see some habits that you might be able to cut down. For example, do you eat out often? It can be expensive and when it is listed for you, you can see just how expensive. Perhaps, you decide to eat out only two nights instead of five. That could be a significant savings for you each month, without much impact. Look for other ways to reduce spending to hit your budget for a car. These savings could add up to the money to pay for a personal loan to buy a used car.

What Does My Credit Have To Do With It?

Your credit score has everything to do with it. Ultimately, it will decide how much you pay per month for a personal loan to buy a used car. Your credit score is an indicator to lenders about your credit worthiness. It also gives them insight as to whether or not you will pay back your loan. The lower your credit score is, the higher your interest will be. Interest is what a lender charges you to borrow money. When your credit is low, the lender feels it is risky to lend you money. They charge you a higher interest because they are taking a risk by lending you money.

Can I Improve My Credit?

It is possible to improve your credit score. It takes consistent and hard work. The first thing you need to do is make all of your payments in full and on time. Late or missed payments are the leading cause of bad credit. Start by making all payments on time. Then you need to begin to decrease the amount of debt you have. When you have a high amount of debt, it also decreases your credit score. You have a debt to income ratio. The higher your debt is by comparison to your income negatively impacts your credit score. Therefore, the more you are able to decrease your debt, the more positively it impacts your credit.

How Do I Know Which Loan Is Right For Me?

When you decide you want a personal loan to buy a used car, you should find the best one for you. To do that, you need to know how to shop for a car loan. It is helpful if you have some understanding of how a loan works to find the one for you. All lenders attach interest to any loan they give you. The interest rate changes from lender to lender, so you can look for the best interest rate for your needs. You can also look online for a loan. Online loans have an easier and faster application process. Often times, online lenders do tend to have a higher interest rate.

Are There Other Options Besides A Personal Loan?

There are some options available to you besides obtaining a personal loan to buy a used car. You have the option to save the money to buy a car before you actually buy it. This allows you to have the money you need to buy the car without adding additional debt. You do not have to worry about making a monthly payment. This also means that you do not have to worry about not having the money to pay the loan. You could borrow money from family or friends. They may be able to loan you the money without having interest added. They may be able to offer you better loan terms which makes it easier to pay back.

Auto Loan Basics Spelled Out: Lending 101

Conclusion

The real question here is, should you buy a car? You are the only one who can answer that question. You need to understand that cars are expensive. No matter what route you go, you are going to put out a significant amount of money. However, most of us need cars to get through everyday life. We need transportation to get to work, school, appointments, and attending to basic needs like grocery shopping.

You may currently have a car that is sucking money in repair costs. That may not be the best way to spend that money. You may be able to get a car payment that is less than paying for constant repairs. You have to be smart with your car and loan shopping. Loans with high interest will cost you more in the long run, too. You need to take a look at your budget and make sure you can afford a car payment.

Taking on a car payment that you cannot afford sets you up for failure. You can hurt your credit. You can lose your car. You will lose a lot of money. Be honest with yourself and what you can afford before taking on another loan payment.