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.

A Simple Overview of How Auto Loan Interest is Calculated


Buying a car is exciting and challenging, and it can be quite overwhelming. It is, however, something that the average American will face numerous times throughout their lives.  Regardless of if you need a two door car or a car for your family, you have to think things through and have a strategy when you are car shopping. It is best to have as much planned as possible before you even begin your search, especially when it comes to your method of payment.

Very few of us ever have enough cash to just walk in and plop down on the counter to buy a car outright. Instead, most of us have to get an auto loan to purchase a car, and that means dealing with auto loan interest. The loans and interest rates are often the most complicated part of the process, so let’s try to make them a little easier to understand.

Different Ways to Buy a Car

When you decide to purchase a new car, there are a couple of ways to go about it. The first is by paying cash outright. Like I said above, we do not all have it like that, so this can usually only happen if you have your eyes set on a lower priced used car. There is no reason to avoid used cars as a whole, but you should be sure you check out the seller and the car to make sure they are worth what you are paying.

The second way to purchase a car is through vehicle finance. It simply means that you borrow the money to pay for the car, then repay like you would any other loan. The differences come in with the availability of the loans, the interest rates, the repayment terms, and, of course, the amount you can borrow.

Types of Auto Loans

There are two basic types of auto loans that can greatly affect your auto loan interest rate:

Dealership

Most dealerships, both used and new, offer financing. Used dealerships usually provide their own financing, which just means that the owner of the used car lot is letting you make payments to him. New dealerships offer financing through institutions, usually one bank or lender that they have a deal with though sometimes they have connections with two or more.

Financial Institution

You also have the option to get the financing from an external institution. For instance, if you have good credit with your bank, you might be able to get a better auto loan interest rate through it than you would through the dealership’s lender. Also, if you take cash to a used car lot, you can often get an even better deal on the used car. It may be better for you to go to a lender yourself, get a personal installment loan, and go find a used car within the amount you borrow.

Calculating Auto Loan Interest

Auto loan interest can seem a bit complicated but it does not really have to be. The interest will most likely be calculated upfront and fixed into your monthly payments. This ratio of interest to principle might mean any of the following depending on the lender:

  • You might find yourself paying all of the auto loan interest long before you even touch the principle. This means that if you owe a total of $3000 in interest and your monthly payments are $500, you will make the first six payments to nothing but interest. After that, however, you start paying strictly on the principle.
  • Another option is that the auto loan interest gets paid by fixed percentage. For instance, perhaps 20% goes to interest while the other 80% goes to the principle every month.
  • You might also get charged auto loan interest that is calculated according to the balance each month. This would mean that if the interest is 20%, then- just like a credit card- 20% is charged on the balance you owe every month.

The way you are charged auto loan interest and the way that auto loan interest is applied to your loan should be disclosed upfront. If there is any confusion about it, be sure you ask for clarification before you sign any paperwork. It is important to understand all the terms of your loan.

It is also very important that you shop car loan rates. Call around to different lenders to find the best possible auto loan interest rate. It is also important to know that your credit score will affect the type of loan and auto loan interest rate you are able to get.

Using an Estimator

If you are looking for a way to determine what your payment will be, you can use an auto loan estimator before you even begin your search. With this estimator, you can input things like your credit score, the price of the car (if you don’t know it yet for certain, just estimate), interest rate, number of payments, and down payment or trade in amount.

These factors can give you a good idea of what your monthly payments will look like. What I really love about these estimators is that you can actually play with them to figure out your perfect conditions- well, as close to perfect as you can get. Let’s say you know that you can only afford a $300 monthly payment. You can hop onto an auto loan estimator and change all of the factors until you get to that $300 monthly payment.

This will tell you the amount you can afford to borrow for a car, the number of payments you should aim for, how much you should come up with for a down payment, and the interest rate that you need to look for. Though you may not be able to control every single factor, using an estimator for auto loans to figure out the best conditions for you and your wallet puts you in the most control you can be in. Try one out for yourself to see just how helpful they can be.

Making Payments

It is very important to make every single payment on an auto loan. If you do not, it can destroy your credit. If you miss too many payments, you might also lose the vehicle that you have worked so hard to obtain. With that, you will lose any money you have paid into it up to that point. Then you will have to start over. Make every payment you can on time.

If you will be late, talk to your lender. Often, they will attempt to work with you as opposed to going through the trouble of taking the car back. You should also keep in mind that, unless you pay your payments on time, you will end up paying more interest than you signed on for. In order to make timely payments, you have to prioritize them in your budget- which means adding them to your budget in the first place.

If you are like many Americans, that means either squeezing another bill into the tight space in between other bills or replacing some things you currently spend money on with the new bill. Below I share some ways to make some extra cash, but here are some ways to make space in your budget:

  • Replace cable with Netflix and Hulu subscriptions or simply decrease the amount of channels you get
  • Replace Starbucks with coffee from home at least a couple of times a week
  • Skip fast food as much as possible
  • Brown bag your lunch and snacks
  • Find ways to cut down on the power and water usage in your home
  • Check for a cheaper cell phone plan
  • Try carpooling, if it is possible
  • Workout at home instead of paying for a gym membership
  • Find creative ways to cut down on your grocery budget, including using apps like Ibotta
  • Fill out surveys on the side for gift cards that you can use at places you regularly shop
  • Find a cheaper place to stay
  • Try date night at home at least half of the time, or make it a game to come up with free dates
  • Learn how to make homemade pizza instead of ordering- it’s more fun and usually a lot more tasty
  • Learn how to make homemade cleaners instead of buying them all the time- natural ones are more healthy anyway
  • If you wash your clothes with hot water, turn it down to warm. When I did this, I made a huge drop in my power bill.

Deciding on the Repayment Term

Most often, you will find that three repayment terms will be offered, though you may run across more. The most common ones are 48 months, 60 months, and 72 months. How do you decide which to choose?

You have to understand what this means. You will most likely find that the higher the repayment term, the lower the monthly payment. Sure, it is tempting to take those lower payments- trust me, I know. The trouble is that the longer the repayment term, the more you pay in total overall thanks to the interest.

Choose the shortest repayment term with the monthly payments you can afford without giving up necessities. But avoid taking the longest repayment term just because you do not want to pay a higher monthly payment. This will save you a lot of money down the line.

Can I Pay It Off Early?

In almost every case, yes, you can. Occasionally, you will run across lenders who do not want you to. They can get the full amount of interest. So they will charge a prepayment penalty if you try. This is not with every lender, though, and more often than not, that penalty will not be anywhere near the amount of interest you will save.

Every single extra penny you pay on your car payment will help you pay it off quicker, but there are a couple of ways to really expedite the process:

  • Increase your monthly payment. If it is the least bit possible, double your monthly payment, even if you can only do it once. If you cannot double it, try just paying an extra $50, $100, or any other extra amount you can.
  • Separate your monthly payment. If your car payment is $500 per month, do not pay it all at once. Instead, pay $250 twice each month. Why? This actually adds up to one full extra payment each year. Think about it: monthly = 12 payments, twice a month= 26 payments. This means that you are paying an entire extra payment without really doing anything extra.

Refinancing an Auto Loan

Many times, people will realize that they cannot afford their car payments with the high auto loan interest that they first agreed to. If you find yourself in this situation, it is an excellent time to refinance your auto loan, but what exactly does that mean and how can it help?

Refinancing your auto loan very simply means taking out another loan to pay off your first one. How does a new loan help anything? Well, because the new loan should have a lower auto loan interest rate than the first one. Often, after you have been paying your first loan on time, you can get a much lower interest rate.

How to Decrease the Amount of the Loan

Paying auto loan interest can increase the length of time you pay on an auto loan, so it is a good step to decrease the amount of the loan you have to get. There are a few ways to go about this:

Car Shop

It is never a good idea to go with the very first car you find without at least looking at some other ones. Shop around for different vehicle makes and models. There is a chance that the fifth car you look at will be much better than the first one. Also, if you find one car model you love, look for the same one on other car lots. You might find that dream car somewhere else that is running some type of special at the moment or just has a lower price tag. Always shop around.

Consider Used Cars

I mentioned before that there is no reason to totally avoid used cars. That is true. In fact, used cars can save you a ton of money. Even purchasing a car one to two years old can save you thousands of dollars. Cars depreciate as soon as you drive them off the lot, so taking a look at older cars can get you one that is just as good- basically- as a new one, if you know how to shop used.

Talk to Rental Car Companies

Rental car companies like Enterprise usually replace their cars pretty often, enough so that the cars they rent are not more than a year or two old, though this can vary. Talk to these companies about purchasing when they are getting rid of cars. The good thing about buying from these types of places is that those cars have been cared for. Oil changes are completed regularly, problems are taken care of by mechanics quickly, and so on.

Talk to Dealerships

A lot of dealerships have used options, as well. There are three dealerships within two miles of my house. When I called around to check about the process to buy through the dealership, each of them asked me if I wanted new or used.

Get a Report on the Car

If you have heard of Car Fax, you know that you can get reports on specific vehicles. I personally have never used Car Fax, but I know some people who have. I hear good reports about finding out all that they needed to make a good purchasing decision.

Look for Bank Repos

Often, people will get a loan for a vehicle through banks and be unwilling or unable to make the payments, so the bank repos those vehicles. Some of them are still very new and in excellent shape. Finding a bank repo can be a great step towards purchasing a good used vehicle. Just call around to the banks in your area and ask if they have anything available.

Save As Much As You Can

Another way to decrease the loan amount is to save up as much money as you can to pay down on the car. If your auto loan interest is 20%, then every $100 you can pay out of pocket is $20 in interest you do not have to pay. That may not seem like too much, but it does add up. Also, the more you borrow, the higher the likelihood of a long repayment term. That, of course, can lead to even greater interest.

So how do you save up for a down payment? With some hard work and creativity. Here is a lesson that I Iearned a long time ago and teach my kids often: It is very rare that things will just be handed to you, so you have two choices to make. You can work hard now or work hard later, and more often than not, it takes less hard work when you do it upfront. In other words, it will be easier to work harder to save up some money now than it will to have to work hard to pay off a car payment. If you are willing to put in the work, here are my go-tos for extra cash:

Extra shifts

This is the tried and true method. Picking up some extra shifts at your job will always bring in some extra cash. This is even more true when you get paid extra on your hourly rate. Many jobs frown upon having to pay overtime pay, but some are happy to do it if it means getting things done that need to be done. Check with your boss about whether or not you can get some overtime pay.

Start a side hustle

It does not have to be anything elaborate or even permanent. Are you a gifted baker? Bake birthday and wedding cakes for people in your community for three or four months. Are you good at organizing? Advertise your skills as a home organizer around your neighborhood. Clean houses, fix lawnmowers, cut grass, babysit or pet sit, paint a house or room. Do some sewing, manage a social media account for a local business, or anything else that you can pull off. You will have better success if you can combine the cash from a few avenues.

Sell some stuff

Have your grandpa’s old records in the attic that you have no clue what to do with? Try selling them on eBay. Have a pair of shoes or jeans that no longer fit? Put them for sale on Facebook or Craigslist. Or carry it all out to your front yard and have a yard sale.

Trade ins

Many car lots will take your old car as a down payment on your new one. Not every lot will do this, but it is worth looking into. And if your old car is not in good shape, that does not necessarily mean you cannot trade it in. In fact, there is a car lot in my area that advertises you can trade anything “you can push, pull, or drag” to their lot.

The fact is that even cars in horrible shape are worth something. Even if it is just scrap metal or for extra parts. If you cannot move the car from your yard, there are people who will come around to pick up old cars and give you some cash for it. These are people who know how to either fix these cars. Or take them apart for the maximum amount of money. These steps could make you anywhere from a few hundred to a couple thousand. Both of which can help out tremendously when it comes to saving on auto loan interest.

A few years ago, we had an old car just taking up space in the drive. But we had absolutely no way to move it or even any idea what to do with it. It just sat there, rusting away and getting soaked on the inside because a window had been busted out for years.

Out of nowhere, we had a knock on our door. Some guy had a tow truck and offered us $400 for the car. I explained that it was in awful shape. And he explained that he could double or triple the money he paid us just by taking it apart. He sold it for scrap metal and a few parts that were still in working order. Even when a car seems worthless, it is still worth something.

Conclusion

When it is time to purchase a new car, you need to be sure that you have a plan in mind. It should consist of how much you can afford to pay and how long you are willing to make payments. If you go to a dealership, either used or new, do not jump on their financing option until you look into external options as well. Be sure you try out an auto loan estimator to get a good idea of what you can afford. Dealerships may not offer you the loan rates and terms you need, so always look into your own bank and other personal installment loan companies for the best deal. Loanry can get you offers from online lenders instantly. And we do mean instantly, right now.

What Lenders Offer the Best Auto Loan Rates?

Shopping for a car is not something most people enjoy doing. If you are like me, you avoid shopping for a new car at all costs. It is a necessary evil because I need a car to get me from place to place.  Buying a car does not have to cause anxiety. It takes just a little bit of research and education. If you do your homework before entering a car dealership, the process is much easier. Continue reading to find out the ways to make car shopping easier, as well as how to find the best auto loan rates.

What Is An Auto Loan?

When auto loan shopping, it is important to have a good understanding of an auto loan. You may be most familiar with personal loans, but auto loans are slightly different from a regular personal loan. There are a few different ways you can obtain an auto loan. It can be through a car dealership, a bank, or a credit union. Auto loans are considered secured loans as the car you are buying becomes collateral for your loan. If you do not make your payments, the lender may repossess your car. You do not own the car until you pay off the loan.

When you get an auto loan, the lender allows you to borrow a set amount of money. You promise to repay that loan by making regular monthly payments. The lender adds interest on to your loan as a fee for allowing you to borrow money. This is the case for all types of loans. The interest rate varies from lender to lender 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 for the best auto loan rates. Most lenders require you to have auto insurance with full coverage. They want to make sure you have full protection in case you are in an accident.

Are There Different Types Of Auto Loans?

When looking for the best auto loan rates, you should understand the different types of loans. There are secured and unsecured loans. I mentioned secured loans in the proceeding section when I talked about loans from the dealer. A secured loan has collateral attached to it to make it less risky for the lender. In other secure loans, the collateral can be any item of value. However, in an auto loan, the car you are purchasing becomes the collateral.

Another type of loan is a personal loan that is unsecured. This means that there is no collateral attached to it. If you do not make your payments, the lender would not have collateral that the lender could take. This makes the loan a little more risky for the lender. There are many different types of auto lenders, so you should research them before deciding on one.

Online Auto Loans – Get Best Loan Rates

You can always look online for an auto loan. Often, you can find the best auto loan rates online. Many websites compare the interest rates and loan options for different lenders and present them to you online. Another great thing about auto loans online is that it is fast and easy to apply for a loan. You fill out the application and submit documentation all on the lender’s website. It takes minutes and you never have to leave your home. You usually find out if you were approved in 24 hours. If you are approved, the money is in your bank account the next day.

In the past, online loans were considered to be only for those with bad credit. That is no longer the case. Many people with all types of credit are turning to online loans because of the ease with which they can apply. They are also enticed by how quickly money is deposited into their bank account. A downside to online loans is they tend to have higher interest rates. You should also pay attention close attention to the online lenders in which you are interested.

There are some shady online lenders. I am sure you already know that there are always people looking to scam others, so you must be careful. You want to find out everything you can about any online lender you are considering. All lenders have to be certified in your state, so make sure they are certified to lend in your state. Make sure they are a legitimate business.

Auto Loan Rates When You Pay with a Credit Card

Yes, you can use your credit card to purchase a car, most of the time. The dealership where you would like to buy your car may have some restrictions on if you can use a credit card. They may not let you use a credit card to buy a car. You can use it for services or parts, but not to purchase the car. When you use a credit card to make a purchase, there is a fee for it. The dealership has to pay the fee, which is usually anywhere from 1 to 3 percent of the cost of the car. 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.

You are probably better off if you search for the best auto loan rates you can find. Cars are expensive and that is a large amount to charge to your credit card.  Depending on the interest rate on your credit card, you may have incredibly high payments. If you are able to pay the balance in full after you charge the car, then maybe it is a good decision for you. Another consideration is that you have enough available balance on your credit card to pay for the card.

If you can find a credit card that offers you a special promotion of 0 percent interest for a specified amount of time, that 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 may be a negative impact to your credit, also because 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.

Auto Loan Rates When You Get a Car Loan from a Car Dealership

Yes, you can always attempt to obtain a loan from a car dealer. Usually when you finance through a dealership, the car maker is who finances the loan. For example, if you want to buy an Accord, Honda is the company that finances the loan. Sometimes, going through the auto dealer makes financing easier for you. You do not have to go on a search for the best auto loan rates. Getting a loan through a dealership prevents you from having to do all the comparison shopping for loans. The dealership handles all of the financing for you. When you decide to finance through the dealership, you already know what vehicle you want and how much it will cost, so you know how much needs to be financed.

Can I Get An Auto Loan With Low Income?

It is possible for you to get an auto loan if you have a low income. Be warned, it may not be easy. You should also pay attention to make sure the lender is legitimate. There are many people in this world just waiting to scam those in desperate situations. Make sure that any lender you use is certified to provide loans in your state. There are some tips for you to consider you are trying to get the best auto loan rates on a low income.

You need to do some research and shop car loan rates available to you. It may take you a little bit of time upfront, but it can save you a lot of money in the end. You may need to consider having a larger downpayment to show the lender you are serious about paying off the loan. Some lenders want you to have up to 30 percent for a down payment. This also decreases the amount you need to finance, which makes your monthly payments lower. If your monthly payments are manageable, you are able to pay them. You might want to consider having a cosigner. This person’s name is on the loan and is agreeing to make sure you pay the loan. If you do not repay the loan, then the cosigner is responsible for paying it. This loan shows up on both of your credit reports.

You should have all of your paperwork with you when you go to buy the car. If you receive other types of income that may not be reported for tax purposes, such as child support, alimony, or Social Security, you should bring proof with you. You may need proof of these funds to secure the loan. Make sure you have proof of identification and insurance with you. You do not want to have anything delay your ability to obtain a car loan.

Auto Loans with Low Income: Ride Here

Does My Credit Matter?

Yes, it absolutely does! Your credit always matters any time you want to borrow money. There are many ways in which your credit impacts your loan options. You should be aware of these items before you begin to look for the best auto loan rates. Having more knowledge makes it easier for you to get the loan you want. I mentioned above how your credit score impacts your interest rate. The lower your credit score is means the higher your interest rate is going to be. You should have all the information you can about your credit report and credit score so you can understand what type of credit you have and the loan for which you may be eligible.

Some key items you should know about your credit score are it is available for you on your credit report. This report shows a listing of all of your credit activities. It has items such as payment history, your current and past debts, and indicates how you use your debt. Also, it lists late or missed payments, as well as any on which you have defaulted. It takes time to build your credit, but only a few missed or late payments destroys it. It gives lenders an idea of your credit worthiness. Credit scores range from 350 to 850. The average person has a credit score between 600 to 750. A good credit score falls between 670 and 800. A credit score that is below 570 is considered bad credit. This score or lower makes it challenging to get a loan with a reasonable interest rate.

What If I Have Bad Credit?

Get an Auto Loan with Bad Credit

There are a few items you should put on your to do list before you begin searching for the best auto loan rates. You should absolutely do these things if you know or suspect you have bad credit. While it is not the best scenario to have bad credit, if you know ahead of time, you can make sure you get the best deal. There are places where you can get bad credit auto loans.

Lenders want you to be honest with them. Many are willing to work with you, but you have to be upfront. If you think you have bad credit, you should first pull your credit record. When you look at your credit record, you can see all the items listed. There could be errors on your report. If there are, fix them immediately. Taking a few simple steps to correct what is listed on your report can increase your credit score.

You should work hard to improve your credit score. One of the top reasons for a low credit score is late payments. You should make sure all of your payments moving forward are on time and for the correct amount. It takes consistent work to improve a credit score, but it is possible. After making six payments on time, you should begin to see an increase in your credit score. I know that it seems like it takes forever, but that is what it takes consistent work.

You should decrease your debt, which increases your credit score. You can work to increase your income by getting a part time or side job. This helps to improve your debt to income ratio as well as giving you more money to pay towards lowering your debt.

How Do I Get The Best Loan For Me?

One of the top ways to find the best auto loan rates for you is to understand what you can afford. This is where a budget comes in. I know, you do not want to talk about it. But, we are going to just a little further down in this article. It is important. There are some other ways to make sure you are getting the best loan for your needs.

You should always look for a loan with the lowest interest rate. The value of a car goes down immediately after you drive it off the lot. Cars do not typically hold a lot of value. Keep in mind, I am referring to the average car, not a antique or a one of a kind vehicle. Those are different and not what the average person shops for when needing a car. If you obtain a loan with high interest, at some point you may owe more on the loan than the car is actually worth. This can be a problem if the car is totaled in an accident. In those cases, the insurance company may not give you enough money to pay off the loan. Pay special attention to your interest rate and the total amount you are going to pay for the car.

You may not want to read this, but the best way to get a great deal on a loan is to shop around. Car dealers offer financing options, but so banks, credit unions, and other lenders. If you are not set on a specific type of car, you may want to shop for your car based on the best loan deal the dealership can give you. The options may change from dealer to dealer.

What Should I Expect During The Auto Loan Process?

If you have ever purchased a car or been with someone who purchased a car, you know it can be a long process. Even with advances in technology, the car buying process still seems to take a long time. There are some reasons for this, the first being that if you finance through the dealer, they have to go through the entire loan process. Often car dealers have a loan officer on site, but it is usually one person working for the entire dealership, or even multiple dealerships. You are waiting around because that person is working on multiple people at the same time. You can decrease some of this wait time by already having your loan approved before buying the car. The more you have accomplished ahead of time, the less involved it is in that moment.

If you are trading in a car, they have to asses the car to determine the value and that adds time. You have to fill out loan paperwork, which you guess it, adds more time. All of these little steps along the way add up to more time you are sitting at the dealership. You should research the best auto loan rates, so you already know where you want to obtain the loan. If you get it from another source, you can walk into the dealership with money in had and that cuts your car buying time in half.

What Is A Loan Calculator?

A loan calculator is a tool that you can use to determine which are best auto loan rates for you. There are many available online. All you have to do is search for loan calculator to find one. It helps you calculate the payment you make each month based upon your down payment, interest rate, and the length of the loan. You can change those amounts to see what the monthly payment is and help you determine if you can afford it. A loan calculator can also help you adjust your idea of what you can afford. You may think you can afford a car that is $40,000 but when you see the monthly payment, you realize that you cannot afford it.

It is a fairly simple tool that you can find online, but it easily helps you determine the best auto loan rates for your current situation. It also requires you to be honest with yourself about what you can afford to pay each month. This is also why a budget (see next section) is helpful to you. It can help you understand what you truly can afford, not just what you want to be able to afford.

Do I Need A Budget?

Yes, you need a budget. Not just to find the best auto loan rates when you want to buy a car, but in general. If you do not have a budget, you should stop right now, click here and use the tools on the website to create a budget. Simply put, a budget gives you an understanding of how much money you make and how much you spend. It allows you to see how much money you are spending and where. It may even surprise you how much money you spend without even realizing it. A budget allows you to be in control of your money and not let your money control you.

It is important to understand how much you can afford to pay each month when you are looking for the best auto loan rates. The easiest way to determine how much you can afford is to list your income in one column and list all of your expenses in a separate column. Then you add up the expenses column and subtract it from the income column. Hopefully, you have a positive number after doing that. Many people do not. The amount of money that you have left is what you can afford to pay each month for a car loan. If that number is much less than you thought it would be, now is the time to make some adjustments to your spending.

Since you have listed out all your expenses, you can begin to reduce them. You can start with easy items, such as any memberships that you are not using. If you have a gym membership and you have not been there in months, cancel it. Unless you have an injury preventing you from going, most likely you are not going back. Now is the time to cancel that membership and you have instant savings. Determine if there are any other subscriptions that you have automatically deducted each month. Change them from automatic to something you have to control. When you control it, you can decide if it is something you really need instead of it just shipping automatically.

After that point, it gets a little harder. Now, you can take a look at how much you eat out. I mean look at everything, including coffee runs and trips to the convenience store for a snack. You should cut out as much of that as you can. Start small and reduce all the times you eat out by half. It may surprise you how much you see in savings. It may encourage you  to further reduce the amount you eat out to save even more money.

Conclusion

The key takeaway is that you must do a little bit of research to find the best auto loan rates for you. You know what is in your best interest and you should drive the decision. Take a hard look at your budget and determine what car you really can afford. It may not be the car you really want. Then you must determine how hard are you willing to work for the car you want. Are you willing to get another job? Are you willing to cut your spending? That car may be worth it to you to do all of those things, but you have to make those decisions for yourself.

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.

Auto Loan Statistical Overview: By the Numbers

The data show not all Americans are benefiting from the strong labor market… The share of subprime borrowers who fell well behind on car payments the last three months of the year was the highest since the second quarter of 2010.
~ Bloomberg.com (February 12th, 2019)

I told a girl I can start right away, and she said, “Listen babe I got something to say. I got no car and it’s breaking my heart, but I’ve found a driver and that’s a start.”

~ The Beatles (1965)

Auto Loan Statistics Overview:

  • The number of Americans borrowing money to purchase a car or truck is going up. Americans originated 27 million new auto loans in 2018. In first quarter of 2019 this accounted for nearly 10% of outstanding consumer debt and that includes mortgages
  • The average debt for that car or truck (new OR used) is going up – enough to be noticeable. The average loan size in December 2018 was $23,438, 6.4% higher than in December 2015.
  • The total amount owed by Americans on their personal vehicles is$1.16 trillion as of March 2019
  • The total amount of debt the average American is carrying overall is rising –9% of American’s total debt.
  • The number of Americans falling behind on their car or truck payments is going up. That number is 4.7% of outstanding auto debt is “seriously delinquent” (90 days or more)
  • The credit scores demanded by auto lenders and the interest rates they’re charging are going up. A higher credit score means a higher loan amount usually. People in the 2nd highest credit tier borrowed on average more: $34,061 for new cars and $21,795 for used.

Sorry to sound so negative right out of the gate, but I wanted to prepare you for what’s ahead. Some of it… well, some of it’s not very pretty. (You, on the other hand, look GREAT today – have you done something different with your hair?)

I long ago gave up trying to predict what the economy was likely to do on a grand scale next week, next month, or next year. I still believe, however, in paying enough attention to what it’s already doing to make better choices for ourselves right now. Let’s dig into a few auto loan statistics – not just because we love charts, graphs, and economic trends, but because we care about OUR auto loans, OUR personal debt, and OUR credit ratings.

Those other folks will just have to figure it out for themselves. Guess they should have been reading these blogs like you, right?

Auto Loan Statistics: Borrowing Ourselves To Death

I’ve written before about the basics of auto loan financing and the processes behind it. Let’s take a moment, though, and zoom in a bit on what’s going on “big picture”:

Auto loan debt

The most recent data from the Federal Reserve Bank of New York (they have a whole department dedicated to research and statistics) shows auto loan debt on the rise, along with every other sort of debt. Home mortgages are the biggest chunk of personal debt, which isn’t particularly surprising. As of the first quarter of 2019, mortgages account for 68% of the money we owe others – just over two-thirds of our total obligations.

Student loans are clocking in at around 11%. If you pay attention to the news or politics at all, you know this is a whole other topic itself. While most Americans, whatever their social status or political leanings, would agree on the potential value of owning a home, we’re not nearly as unified in our thoughts on going into debt in order to attend college. It’s a fascinating argument, full of controversy and hurt feelings and maybe even yelling and personal attacks. Still, we’ll save that one for next time. Auto loan statistics give us more than enough to think about at the moment.

As you can see on the graph, auto loans (the olive green segments) account for about 9% of our total debt. That’s nearly a dime out of every dollar we make going to pay for our cars and trucks, and if trends continue, they’ll pass that within a year or two. That’s more than our total credit card debt or any other sort of loans other than the two we’ve already discussed.

Auto Loans and Credit Scores

Here’s a personal challenge for you. Take a few minutes to examine the graph below from that same Federal Reserve Bank of New York I told you about above. What do you notice about it? What patterns or trends seem to be emerging? It’s always good to pay attention when people throw these sorts of graphs at us. This particular source is legit, but you’d be surprised how often less-reliable players bury us in stats presented in unforgivably deceptive ways.

Or maybe you wouldn’t.

Take a look. I’ll see you below in 2- 3 minutes.

Well, what did you notice?

The horizontal axis (the part along the bottom) indicates that these stats are drawn from the first quarter of each year from 2004 through 2019. In other words, January through March. Economic statistics often distinguish this sort of thing because our buying habits reflect an annual cycle as well as whatever long-term patterns emerge. For example, every year just before Christmas there’s a surge in retail spending (for obvious reasons). Comparing consumer spending in October of 2012 with consumer spending in March of 2015 might make it look like we’re spending less, when in reality we simply spend less in March than we do in October, no matter what year it is.

Nevertheless, the same trends in this particular graph would emerge whatever quarter they chose to compare. I’m sure you identified a few.

Over the past decade, auto loans for folks with credit scores of 620 or less (the darkest blue along the bottom of the graph) have risen, but seem to have plateaued a bit more recently. There’s a similar trend for scores in the 620 – 659 range (the orangish-yellow) and those between 660 – 719 (the light gray). Borrowers with a credit score between 720 – 759 (dark gray), however, continue to grow as a percentage of total borrowing, as do those at the top of the credit history food chain with scores of 760 or above (light blue).

In other words, our auto loan statistics are telling us that either people across the U.S. are improving their overall credit scores, or lenders are demanding better credit scores before making auto loans. Any guess which it is?

It’s both, actually. Despite the fact that the number of people behind on their vehicle loans is increasing, FICO scores are on the rise. (Your FICO score is the three-digit number, usually between 300 – 850, which gives a snapshot of your overall credit history. It will vary depending on which credit reporting agency is consulted.)

According to Experian, one of the Big Three credit reporting agencies used by the vast majority of lenders across the nation,

The average FICO Score has increased over time as the number of Americans with exceptional scores have grown. In 2018, more than 21% of Americans were considered to have an exceptional FICO Score, an increase of 5.6 percentage points from the average in 2005.

At the same time, this trend doesn’t seem to be reflected in how consistently people make their car payments. According to a recent report from the Motley Fool,

If you live in America and you are in debt, you are definitely not alone…

Among the more troubling facts… is the record 7 million Americans who are 90 days or more behind on their auto loan payments. It’s a signal, economists say, that Americans are struggling to pay bills despite other indications of a strong economy and low unemployment. Approximately 6.5% of all auto finance loans are 90-plus days past due.

What This Means For You

Source: Federal Reserve Bank of New York via Finder

OK, great – thanks for the brief but depressing lesson in auto loan statistics, Blaine. But what does this mean for me? Do I need to get used to walking to work? Fix up my bike? Should I start bumming a lift from my brother-in-law? Honestly, he’ll never let me forget the last favor he did for me; I don’t think I can stomach asking another.

In my mind, these numbers suggest a few things we should think through before taking out another auto loan.

  • Most of us need a car. That’s just reality in the modern world. But if you can walk to work part of the year, or bicycle, or carpool, or catch a ride with your brother-in-law, maybe that’s not a bad idea. It might delay how long you have until you need a car, or reduce the wear and tear on the car you already have. Plus, a little walking or cycling is good for you. (As for your bro-in-law, offer to come help him tend that tacky garden of his or watch the kids once in a while in return for that lift to work. It’s the right thing to do and it might help with his attitude.)
  • Be realistic about how much you can spend on a new (or new-to-you) vehicle. Many lenders will approve you for far more than you can realistically pay because the numbers look good on paper. But you don’t live theoretically on paper. You live on a real budget, earning and spending real money each month. You know what you can actually afford. I want you to have a car or truck you like, and which you can rely on. But I also want you to be able to pay for it. On time. Every month.
  • Shop around for auto loans as intently as you shop around for autos. Maybe more so. There’s a wider variety of lender options out there than ever before. Go to your local bank or credit union. See what dealers are offering in-house. Then shop online lenders through a reputable marketplace. Compare interest rates, terms, and other features of each. YOU’RE THE CUSTOMER. They should WANT your business. You can find credible lenders here and see whether they’d want to give you an offer:
  • There are tons of auto loan calculators online. Try a few. Play with the numbers and see what happens. No one’s watching, and you’ll go into the process better-informed and far more comfortable with the various “moving parts” in any auto loan.
  • If a dealer doesn’t have the car or truck you want, or they don’t have the vehicle you want with the right features or at the right price, you walk. It’s not personal (usually); they don’t have what you want and you have every right to look for someone who does. It’s the same when you shop car loan rates. If at any point in the process, you realize you’re not getting the terms you want, or the answers you deserve, politely let them know you’re going to explore other options. It’s not personal. In fact, it’s not a bad idea to keep that door open in case you end up discovering that what they’re offering is as good as you’re going to get. The point is that you always have choices.

  • Once you’ve taken out that auto loan, pay it. On time. Every month. I know this isn’t always possible, but even if there are times you slip a few weeks behind, never let yourself get comfortable with those patterns. Even if the lender doesn’t harass you every time. Your personal vehicle is probably a big deal to you. Some of us have very tight relationships with our cars or trucks. I assume you take care of it – oil changes, checking those filters, maybe even washing it from time to time. Part of auto care is paying for it.
  • Once you’ve taken out that auto loan, pay it on time every month. Oh, did I mention this one already? I did? Hmmm… this one must be pretty important. Take another look at that graph up there about credit scores and auto loan statistics. When you take out that manageable auto loan after negotiating with your local or online lender for the best terms you can, and you make those payments consistently, you quickly work your way up the credit reporting scale to become one of those dark gray or light blue zone people. Plus, you’ll sleep better.

Auto Loan Statistics: What Can You Afford? (And What Can You REALLY Afford?)

Remember those online auto loan calculators I mentioned a few minutes ago? Once you’ve gotten the hang of your favorite auto loan estimator (it doesn’t hurt to try a few different ones), it’s probably a good idea to take a hard look at just how much you can genuinely afford before you get serious about car or truck shopping.

Auto Loan Basics Spelled Out: Lending 101

I’m talking actual math. Looking through the past several months’ mortgage payments, utility bills, credit cards, average amounts spent on groceries, entertainment, etc. I know this can be… unpleasant. I spent many years believing that the less I thought about money and how behind I was on everything, the better I must be doing. I know you’re not nearly the mess I was, but laying out our theoretical budget and comparing it to our actual spending is probably the least-fun part of thinking about getting a new (or new-to-us) vehicle.

Nevertheless, I’m asking you to do it. Not for me – I won’t know if you just keep skimming the article and never give this section another thought. I’m asking you to do it for your own clarity and peace of mind. Even if the news is bad, better to recognize that before you take out the loan.

Honest Money Tip:

Let’s be honest – you’ll probably still be able to get that loan and buy a vehicle. But the best way to be on the right side of next year’s auto loan statistics is to make sure you can make those payments on time by being realistic about how much you’ll spend going in.

How Do I Limit the Size of my Auto Loan?

You know the answer to this one, but perhaps you’ll feel better hearing it from someone else. There’s no point knowing auto loan statistics unless it helps you make good auto finance choices.

  • If you’re looking at new vehicles, consider a used car or truck instead. (It’s still new to you!)
  • Make a list ahead of time of which features are essential for you and which would simply be nice.
  • Be willing to consider a vehicle already on the dealer lot and which they really want to move. Don’t buy a car you don’t want, but if you can live with dark green instead of black or survive without that CD-player that used to be standard until mp3s and satellite radios took over, it could save you serious bucks.
  • It’s the 21st century. Explore your options. Banks are fine. Credit unions are wonderful. But there are plenty of legit online auto lenders who are changing the game. I wouldn’t expect you to throw yourself on the mercy of the first one that pops up in your Yahoo search, but it turns out I know some folks who are shockingly good at hooking folks up to reputable online lenders for things like auto loans.

How Can I Do A Better Job Making Payments On Time? (And Please Don’t Tell Anyone I Asked)

I won’t tell, but you shouldn’t be embarrassed. More people should be asking this question.

One of the most useful, although at times painful, lessons I’ve learned on my way to becoming as old and wise as I am now is that sometimes we need to be reminded of the simplest things. We’re busy people, often with complicated lives. Marriage and family alone can take up more emotional energy than we feel like we have, and by the time you add work and other obligations, it’s honestly a wonder we remember to bathe, let alone keep our financial life in perfect order. There’s no shame in revisiting a few basic ideas for keeping your loan payments timely.

Honestly, while we want you to be happy and everything, we also want you to start nudging next year’s auto loan statistics in a better direction. Here are some things to consider, remember, or try:

  • Set up auto-pay. This is only a good idea if you get paid regularly from your job. It’s particularly handy if you’re paid through some sort of direct deposit. Setting up your mortgage and auto payment(s) to come out automatically the day after payday reduces the chance you’ll get behind opening the mail, let it slide while you’re out of town, etc.
  • Put it on the calendar. I know, I know – it’s due the same time every month! Why would you need to write that down? Friend, I put my wife’s birthday in every new planner I get each January, first thing. It doesn’t change, either, but I value her being happy with me more than I do my ego remaining elevated by the conviction I couldn’t possibly overlook something so important. Ever notice most calendars and planners indicate when it’s Labor Day? Halloween? CHRISTMAS?! Like anyone could forget? But it’s in there. And there’s a reason for the auto loan statistics we’ve already discussed. Besides, I’m betting you have other bills to pay each month as well. I’d organize the whole mess of them if I were you and write them out.
  • Prioritize purchases. When I was a kid, long before I had a job, I always knew when payday had arrived because we went out to eat. In retrospect, the places weren’t that fancy, but it was a big deal to me because my mother – god rest her soul – was a horrible cook. When I had a family of my own, we tended to do the same sort of thing. We’d go eat on payday, go shopping, do fun things, buy new clothes, etc. Then, a few days later, we’d see what was left and start figuring out which bills we could pay this time around and how much cash we needed to withdraw to avoid multiple overdraft fees (we’d usually have at least one, but five or six could really cut into the ol’ budget.) I’m not proud of this, you understand. I’m just trying to be honest with you. By all means, have fun with the family. Splurge and eat sit-down from time-to-time. But do it with eyes wide and mind clear. Have a plan. One that includes making the most important payments first. Don’t become another alarming pattern in auto loan statistics.
  • Consider a debt consolidation loan. If you’re having trouble each month consistently not just paying your bills but even keeping track of them, it might be beneficial to pay off the majority of them with a new, hopefully lower-interest, debt consolidation loan. It probably won’t include your mortgage and might not include your car payment, but if a half-dozen credit cards, medical bills, department store charges, and the like, can be reduced to one monthly bill, life just got easier. Your odds of keeping track of three payments are way better than those of keeping up with twelve. If you do this, however, DO NOT NOT NOT NOT NOT start running up new debt because wow-look-at-the-freedom-we’ve-found! That’s missing the point entirely, grasshopper. Just like with an auto loan or any other sort of loan, borrowing isn’t inherently “good” or “bad.” It’s not automatically “wise” or “foolish.” It’s about looking at your needs, examining your options, asking the right questions, and then doing your best to stay on course with whatever you decide. Anyone who promises you more than that is not being honest with you.

Let’s Talk About Credit Scores

If you remember the bullet list we started with above, we’ve addressed most of the things I warned you about while trying to focus on what it all means for YOU in YOUR situation. Auto loan statistics are fascinating and all (well, I think they are – maybe I’m just weird), but not nearly as essential as figuring out your own situation and whether or not you should consider the wonderful array of online lenders, clean up and try your local banks, find some way to drop a few clues in front of rich Uncle Herschwilder, or a little of all of the above.

As I’m sure you recall from the intro, the sorts of credit scores demanded by auto lenders and the interest rates being charged are both going up. That can be a nerve-racking for those of us looking at auto loans with bad credit or any sort of personal loans with a less-than-perfect credit history. I’m not going to lie to you. It will be harder to get a great rate with shaky credit. It may be impossible to get any kind of auto loan from some traditional banks or credit unions.

 

You should still ask, even if you feel uncomfortable about it. You’ve come this far plowing through auto loan statistics; you can handle anything! Besides, there’s no reason to let embarrassment limit you on this one. This is America – we eat too much and spend too much and watch trashy TV and vote for all the wrong people. It’s not like you’re the black sheep of the family. If you have iffy credit, you fit right in! That doesn’t make it easy, but it does mean you should be confident and methodical in your search for your best auto loan options.

Still, it’s useful to have slightly better credit. It’s also possible. Whether you’re hovering around average, dangerously close to pretty good, or sunk deep at the low end of the credit swamp, the best time to start improving is now. The best way to start improving is to start.

Keep in mind that your credit score and even your full credit report may looks slightly different from reporting agency to reporting agency. It’s kinda like movie reviews – one guy may care more about the writing and another the acting, but in general, most great movies get great reviews, mediocre movies get mediocre reviews, and so on. You may not even want to look, but you really should. Don’t worry, I’ll stay right here until you get back. I’ll even be prepared with tissues, just in case.

Improving Your Credit Score

Alright. Good news or bad, it is what it is. Auto loan statistics say every little nudge of that FICO score matters, so I’m going to wrap up by pointing you to some good advice on ways to nudge. I would NOT pay someone to “fix” your credit score or get too excited about anything claiming to immediately game the system in some way. You got into debt over time, probably through a long series of choices. Get out of it the same way. Think healthy living vs. crash diet fads… which one actually works most effectively over time?

  • Your friendly local American government has a rather handy little site about credit scores, what they are, how they work, and related issues. It’s about as comprehensive and neutral as you could hope while still being, you know, our government hard at work.
  • Experian is one of the ‘Big Three’ credit reporting agencies, and by far the most helpful in terms of website content. This piece explains how scores are calculated and has a nice list of practical ways to improve your credit rating.
  • Finally, there’s extensive advice on your FICO score and tons of related articles at MyFICO.com. This site is new to me, but they sure seem to have everything there is to know about this topic – more even than ME, and that’s impressive.

I know we’ve covered a lot in one burst. Auto loan statistics can be a bit sobering. Take a breath, and don’t sweat it if you don’t remember it all the first time. It will still be here when you open your computer or phone tomorrow and you can refresh yourself on anything you missed. Or, if you’re ready to go a little deeper, we’re always happy to help connect you to online lenders who can answer your questions in more detail. It’s up to you what happens from there.

Still, I have a good feeling about you on this one. Go make good things happen.