You’re typically asked to pay a fixed interest rate and monthly payment for 6 to 84 months, at which point your car will be paid off. Because auto loans are secured, they tend to come with lower interest rates than unsecured loan options like personal loans. Depending on your credit score, while the average APR for a used car is anywhere from 1.99 percent to 20.67 percent. .
Dealership financing means you’re applying for financing through the dealership. You and the dealer enter into a contract where you buy a car and agree to pay, over a period of time, the amount financed plus a finance charge. The dealer typically sells the contract to a bank, finance company, or credit union that will service the account and collects your payments.
Generally, your credit score will make the biggest impact on the rates offered. The higher your credit score, the lower APR you’ll receive. Having a higher credit score may also allow you to take out a larger loan or access a broader selection of repayment terms. Choosing a longer repayment term will lower your monthly payments, although you’ll also pay more in interest overall. .
If you don’t have a strong credit history, you may need a co-signer on the finance contract. Co-signers assume equal responsibility for the contract. If you can’t pay what you owe, your co-signer will be on the hook.
It is possible to get a car loan with bad credit, although having bad credit will raise the rates you’re offered. If you’re having trouble getting approved or finding acceptable rates, try taking these steps: .
– Improve your credit: Before applying for an auto loan, pay down as much debt as you can and avoid opening new accounts, like credit cards.
– Make a large down payment: Making a larger down payment will lower your monthly payment, but it could also help you qualify for better rates.
– Consider a co-signer: A co-signer with good credit will take on some responsibility for your loan if you default, but they can also help you qualify.
The process of getting a car loan is similar to that of getting any other type of loan. Here’s how to start: .
1) Credit Application: Fill out the online credit application, as soon as we receive your information we’ll try to find lenders that have APRs and repayment terms that will fit your budget.
2) Prequalify: Prequalifying with lenders is often the first step of the application process, and it lets you see your potential rates. To complete your application, you’ll likely need documentation like proof of income, proof of residence, and a driver’s license.
3) Begin making payments on your loan: Your payment schedule will start as soon as you receive your auto loan. If needed, set up a calendar reminder or automatic payments to keep you on track with your monthly bill and avoid late payments.