Entries in category Car Loans

Which Car Loan to Take?

The car loan can be availed through three main sources and that is through car dealership, credit union and banks. Many of the buyers think that the loan offer by the car dealership is the best and do not look for other options. However, this is not true always and you should accept the offer given by them if it is the best. It is always advised that you first look for the lowest interest rate and get a pre-approved loan for buying the car whether it is bank, credit union or any third party lender before you go to your car dealer. Now, if the offer made by the car dealer can beat the offers you have from bank, credit union or any other lender, you can definitely accept that. If they offer you similar or lesser interest rate with fewer or no charges and fees, it is the best offer and can go for it, if not you have the finance. The next thing would be to look for the term of the loan as long term loan can lead you to pay more of interest along with the principle amount.

When you go with your own financing to the dealership, you have an upper hand and you can negotiate with them on interest rates, charges and fees. Sometimes, it so happens that the dealer will give you discount on your car but at the same time will give the car on high interest rate which may cost you all the more money in the long run. This is one area where the car dealers focus on earning interest and profit from the sold car. When you have finance in hand you can just concentrate on the cost of the car and other trade in, if you also have one.

Car loan is important if you want to buy a car and do not have enough cash to pay the entire amount for the car. The car loans come with an interest rate and the term for which it is taken decides the amount that you end up paying at the end of the term other than the principle amount. Car loan for short term though will increase your monthly installment; it will definitely lessen the interest amount that you pay on the borrowed amount. Hence, it is very necessary to calculate your budget before you go for buying a car or taking up a loan for the same.

Interest on Car Loans

When you dream to buy a car, along with it comes the car loan and the interest levied on it. However, there are many factors which decide the rate of interest which is applied on your borrowed money. All the people who take up a loan are not given the money at the same interest rates. Some may be charged more interest rate and others may be charged less. The interest rate that is charged on your loan is largely dependent on your credit score. Credit score is a number assigned to the people by the credit bureaus based on the debt amount in your name and how good you are at paying your bills and debts on time. Lenders use these score to decide your capability of paying back the loan that they give. In case you have a bad credit score, you may be given loan at a higher interest rate thinking you may not be able to pay the loan and to cover the risk involved.

The people who are young, generally have a low credit score, this is even when they do not have any debt or have tried their level best to pay their bills on time. This is mainly because they do not have a long credit history. Since they do not have long credit history it becomes difficult for the lender to decide your capability of paying back the loan. Hence, such people will also have higher rate of interest on their car loan amount. Looking at the importance of the credit score in getting you the loan at best interest rates, you should know your credit score before applying for car loan. If the credit score is low, do all that is required to make it high.

You can get to know your credit score and other details by paying small fees. Knowing details of the credit score is very important, as there are instances of stolen identity in which someone takes up credit card in the name of someone who is unaware of it. If any such condition arises, you may need to get it corrected so that you do not pay for someone else’s fraud. Also make it a point to report this fraud to credit bureau to fix the error before you apply for the loan. A good credit score can earn you a very low interest rate on your car loan.

How to Apply for Car Loans?

When you apply for admission in a college or school, do you apply in just one school or college? Similarly, you should not just apply for car loan to just one lender. You should contact your credit unions, the car dealer, bank and any other local lender for car loan and find out their offerings on the car loan. When you apply for car loan, you have to fill up an application form which will ask for your social security number, income information, any debt that is outstanding like student loan or credit card bill, monthly expenses including rent and mortgages. Once you have filled the loan application for multiple lenders, it is recommended that you do so all together or at very short interval as it will let the credit bureau to know that you are shopping for car loan. If you spread out your loan application to multiple lenders, it may lower your credit score due to multiple loan application for car loan. To tide over this, submit all your application forms at the same time.

When you fill in the form make sure that all the information that you furnish is correct. Do not exaggerate your income or understate you expenses of hide any kind of debt that you may have. This is because all the information that you provide will be validated against the proof and will definitely get caught if the information is false. The lender using the social security number provided can pull out all the information or your credit history as well as credit score. The lender will analyze your report and then decide whether a loan offer should be made to you or not. He can even get access to your income, debts and expenses.

When shopping for the car loan do not just go through its interest rates but also look for other details. Do not accept the offer which charges you heavy fees. The next thing that you should look for is the term of the loan, it is said that longer is the term lesser is the monthly installment. However, in the long term you end up paying more of interest amount. Make sure that you check if they have any pre-payment penalties. This may prevent you from paying off your loan early as the pre-payment charges in general are very high. After checking all these things you can go for the best deal offered to you.

Documents for Car Loan

Buying a car can be a big deal if you financing the car cost on your own. However, easily available car loans have made it easy to own a car. Car loan is a way of getting finance for your car which you need to pay back to the lender along with the interest as agreed upon. The car loan can be got through many means but the most common ways of getting the loan is through car dealership, credit unions and obviously banks. The car loan can be easily availed through any of the means if you fulfill certain conditions like good credit score.

The car dealers provide to their customers a lot of schemes for car loans. They have good offers on car loans running time to time but are mostly on selected models or for certain months of the year. Credit unions also provide car loans and are the most popular and reliable to get loans through it. This is good for the first time car buyers as it is difficult to get loan for them through banks. Banks are the most difficult to get the loan and their rate of interest is also high when compared to other two. However, before going for car loan you should go through all the offers and then decide which one to take.

When looking for car loan you will have to furnish some documents to get the approval. Some of the documents that you will require while applying for the loan include:

  • For any loan request you would have to submit your identity proof, Address proof, SSN or social security number, information on your employment, income and proof of you as citizen of USA.
  • Before they finally give away the loan they will require the purchase document, bill of the sale, title, registration, income proof, two years income tax return document, financial statements and even W-2s.
  • For refinancing car loan purchase from individuals, you will have to submit lease buyouts, certain information about the vehicle like, its model, make, year, identification number and mileage.
  • If you want a loan more than $150,000 then you need to submit some documents like, the most recently filed income tax return documents, all the schedules and W-2s. All those who are self-employed, they need to provide two years income tax returns for corporate federal, list of all the assets and liabilities and recent bank statement which will verify all the liquidity that is claimed and also personal financial statement.

Disadvantages of Taking Car Loan

Everyone wants to have a car of their own. It is ne luxury that everyone dreams off but not many can afford to pay the cost of the car at one go. Buying a car can be difficult in case you have to pay the entire amount straightaway and you may also end up losing all your savings. However, car loans are an easy way to get car of your choice and realize your dream. When you take up car loan, you need to pay back the borrowed amount plus certain interest that was agreed upon by the borrower and lender at the time of taking up the loan. Though there are several advantages of taking up a car loan there are a few disadvantages also which one should be aware of before taking up the car loan.

When you take up a car loan, it also has some interest rate applied on the borrowed money and is applicable for the term for which the loan is taken. The interest rate on car loan is very much high and especially if you have not so good credit score. Though car loan gives us the facility of paying back the borrowed money in monthly installments, we also end up paying huge amount of extra money then the borrowed amount as interest. If you have taken up car loan, you cannot go abroad and even restricts you from disposing off your car. If you want to do the same you would require taking approval from the financer. Most of the companies levy heavy pre-payment charges. Hence, if you would like to pay back the borrowed money before the end of the term, you may end up paying a lot of money as pre-payment charges. So, you may in the end lose more money than paying the loan in installments.

If you have taken up a car loan on collateral, it may happen that in failure to pay back the borrowed money you lose your asset. Sometimes, it may happen that to pay of car loan you take up another loan which in turn will increase your burden. Well, these are a few disadvantages of taking up a car loan, but before out rightly rejecting this one should weigh the pros and cons equally and then take up a wise decision. Do not forget that a car loan may help you realize your dream of buying a car.

Car Loan

Buying a car is like a dream coming true, especially if it the one which you always dreamt of. The facility of availing car loans can be one way of making you realize your dream. Car loans are also available for buying used cars. Before you go for car loans, there are some basics of loan which one should know. Taking up a car loan is the best way of purchasing a new or used car as per your wish. When taking up a loan, the borrower borrows money from the lender which he has to return within a stipulated time frame. The returned amount is along with the interest and hence is much more than the borrowed amount. The borrowed amount is called the principle amount while interest is levied on the borrowed amount which goes as profit to the lender on the lent amount.

The interest rate on the loan is certain percentage of the borrowed amount and it need to be paid back along with the principle amount. Say for instance you take a loan of $40,000 at an interest rate of 5% , than you will have to pay back $42,000 at the end of the loan term and it will be principle amount plus the interest. The car loan amount payment also includes taxes and other fees which one need to consider before taking up the car loan. It is advised to sit down and determine all your expenses and then set a budget for the car loan. Buying a car will include expenses on the cost of the car, its registration, insurance and after you buy it, the expense will be on its fuel, repair and maintenance.

The loan is always given for a term. The word loan term refers to the time for which a loan has been taken. The term of the loan is like for 24 months, 36 months, 48 months, and 72 months and so on.  Say for example, you take up a loan for 5 years. In this case, it does not mean that you need to pay back the entire amount at the end of the term. In case of term loan you need to pay the borrowed amount in the form of monthly installments till the term. The borrowed money along with the interest is paid in installments and at the end of the term you own the car. If you fail to pay the loan amount the lender can take back the car.

Car Loan Services

Buying a car is no more a distant dream, as you can buy them easily using car loan facility. The car loan can be availed through different sources and it includes, through the car company itself, credit unions, banks and several other financial institutions. Most of these auto loans companies provide excellent features and services to their customers. Some of these financial institutions have no application fees and even have certain options for the people with low or bad credit. Most of these companies provide online services which include integrated car search options, online account creation, online loan calculators and even maintenance option.

Taking car loans through some of the companies is extremely easy as you just need to fill up a form and they will provide you with funds which you can use to buy new as well as used cars. This is a very special feature provided to the client especially when they have not decided which vehicle to buy. Most of the car loan companies have no restrictions on the type of vehicle and their price. They may not cancel a loan request just because of the price, in other words there won’t be any limitation on the loan amount. Some of such companies do not even look at your credit score or say your bad credit score does not affect your loan application approval. The loan approval is a long process and may take a minimum of 3 days to get approved. Depending on the circumstances, it may take longer.

There are many auto loan review online service which allows the customer to work with dealership and other private sellers. There are rare chances of loan getting rejected because you have a bad credit score. However, in such case it is most likely that you will have greater rate of interest when compared to those with good credit score. Most of the companies also provide customer support service and you can reach them via phone, email and live chat. Well, it is recommended that when taking up a car loan, you should compare the quotes from different financial institutions, their rate of interest and terms and conditions before taking up the loan. This ensures that you take loan from the financial institution that gives you the best deal and hence the burden is less. If you want car and do not have money to pay at one go, car loan is the best option to go for.

Car Loan Finance

Before you go on the hunt for the car of your choice and the dealer from whom you want the car, you should get your finance in order. Car loan is a very important part of your process of buying the car. Most of the people are of the view that if they pay the dealer cash for the vehicle that they buy, it will give them a much better deal. Well, this is not true. The dealership will get the money anyhow, that is even if you pay them the cash yourself, get car loan on your own or if you arrange for a loan through them. Some of the new dealers provide special rates for car loan and in such case you will have to get the car loan financed through them.
One very important aspect of taking up a car loan is your credit score. It is advised that before you go on looking for car loan; check your credit score report. You should be aware of your credit report and all its details beforehand to avoid any embarrassing situation. Credit score is very important in getting you finance for your car. If you have bad credit score, your car loan application may get rejected by most of the banks. Some financial institution if agrees to give you the loan, the rate of interest on the same will be very high. Hence it is very important that you get your credit score straight before applying for car loan and in that sense any kind of loan.
The car loan like most other loans depend on five things, credit history, years of employment, length of stay at current residence, the cost of the car that you buying and last but not the least, your ability to pay back the taken loan. These are some of the factors that will affect the interest rate that you will have to pay on your loan amount. This will affect you loan whether you take it for buying a new car or a used car. The interest rate on the loan for new car is generally lower than that of the used car. It is a good idea to compare the rates of different finance companies, their charges and fees before taking up the loan. It will give you the best rate for your loan and reduce your monthly installment.

Car Loan FAQ

When going for car loan there will be several questions coming to your mind. You can go through some frequently asked questions and their answers to solve some of your queries. Answered below are some of the frequently asked questions about car loan.

  1. How to get car loan?
    The first step towards getting a car loan is to shop around for finances by different finance companies and their schemes. This will help you in getting better deal on your car loan.
  2. What amount of loan can I get?
    The amount of loan that you can get to buy your car depends on many factors like the cost of the car, the percentage of finance you want. Most of the time you get financed 90% of the cost of the car as car loan. There is a limit beyond which some of the banks cannot offer loan. The loan amount also depends on your income.
  3. What are the documents required as proof of income?
    The income proof required by most of the finance companies or the bank is the two years income tax returns. Most of the financer do not accept speculative income from rental, stock market or agricultural income. Some may discount all such income by 50% and then approve the loan.
  4. To avail the loan do I need to give collateral?
    No! To get the loan you do not require collateral. However, you will have to hypothecate the car in the banks name and also there will be an endorsement made in the RC book of the car.
  5. How do I pay the EMI or the Equated Monthly Installment?
    In general all the banks take a postdated check for the entire payment term or at least for two years. They may also take the EMI directly from the account if the bank and the dealer agree for it.
  6. Is EMI should be the only deciding factor for taking up a loan?
    Well no! There are many other charges and fees like the processing fees, many upfront payments like that of the stamp charges, insurance, registration and advance EMI’s which you need to check before finalizing the lender for the loan.
  7. Do I get finance for car accessories?
    Most of the banks do not provide finance for car accessories other than that which come from factory already fitted as car accessories like the AC. Some of the banks may finance for music systems.

Car Loan Basics

Once you have found your dream car, the only hitch is to pay for it. Most of the people who buy a new or used car, take a loan to do so. Car loans are easily given nowadays by several financial institutions if you fulfill their terms and conditions. However, to get the best deal on car loans there are a few basics that you will need to know about car loans.

Car loan is one way of getting finance to buy your new car or used car. When taking up loan you borrow money from the lender to whom you need to pay back the borrowed amount in the stipulated time period. The borrowed amount for the car loan is called the principle amount. Almost all the car loans have certain interest rates, this is how the lender will earn profit or get some money out of the money they have lent. Mostly the loan interest rate is certain percentage of the borrowed amount or the principle amount which you need to pay back along with the borrowed money. Say for example you take up a loan of $20,000 as car loan on 5% interest rate, than by the end of the loan term you would be paying $21,000 which includes the principle as well as interest. This is exclusive of the taxes and fees and hence you should take into account all the expenses before going for the loan. To do this you need to sit down and calculate your expenses and fix your budget for the car loan you can afford. The budget for the car will also include expenses on its fuel, insurance, repair and maintenance.

The amount of money you have to pay back depends on the term of the loan in other words the time that you have to pay back the borrowed money to your lender. If you take the car loan for 5 years, you will be paying the money back in 5 years and get your car clear and free. In 5 year term, you do not pay the entire sum at the end of the term; you pay the money in installments for all these years. The lender gets a set monthly installment and the borrower pays back the borrowed money in the set period of time. Once you have paid the entire loan amount, you become the owner of the car.