auto finance Archives

The 7 Best Auto Loan Companies in America

Posted on November 26, 2020 | by Brandy Woodfolk

New cars at sunlit dealer showroom close view.

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

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

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

Do not let your car payment exceed 20 percent of your take home pay and aim to have a down payment of at least 20 percent of the vehicle's purchase price.

7 of the Best Auto Loan Companies in America

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

1. 5K Funds

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

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

Loan Range: $1,000 - $35,000
Minimum Income: Unspecified
Interest Rate: 5.99% - 35.99%
Terms of 2 months to 72 months
Must be a citizen of the USA or a permanent resident
Good for those with poor credit to excellent credit

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

Pros

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

Cons

Maximum loan of $35,000
Some short repayment terms

2. CarsDirect

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

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

Loan Range: $1,000 - $35,000
Minimum Income: $18,000 annually
Interest Rate: 10% - 13%
Term lengths: 24 to 84 months
Good For: People who want to build their credit
There is no minimum credit score

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

Pros

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

Cons

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

3. Monevo

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

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

Loan Range: $500 - $100,000
Minimum Income: Unspecified
Interest Rate: 2.49% - 35.99%
Term lengths: 3 to 144 months
Good for those with poor credit to excellent credit
Minimum credit score is 450
Must be a citizen of the USA or a permanent resident

You can apply for loans up to $100,000 with terms all the way up to 12 years. The interest rates start very low at 2.49 percent but they can get high depending on your credit.

Pros

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

Cons

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

4. Auto Credit Express

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

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

Loan Range: $1,000 - $35,000
Minimum Income: $1,500 pre-tax monthly income
Interest Rate: 3.99% - 29.99%
Term lengths: 3 to 144 months
Good for: People with bad and good credit,
military personnel

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

Pros

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

Cons

Can only purchase through a partner dealership
Might require down payment

5. Capital One Auto Finance

Capital One is pretty well known for being open to those with less than perfect credit. Their auto loans are no different. Even those with a score as low as 500 have a chance of being approved if they meet the income and citizenship requirements. Interest starts very low at only 3.59 percent, but lower credit scores do move closer to 24.99 percent. Capital One auto loans typically range from $4,000 to $50,000, and you can get up to 72 months to repay the loan.

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

Loan Range: $4,000 - $50,000
Minimum Income: $1500 to $1800 depending on credit
Interest Rate: 3.59% - 24.99%
Term lengths: 24 to 72 months
Minimum credit score: 500

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

Pros

Provides an auto search tool
12,000 partner dealerships
Up to 72 months for repayment

Cons

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

6. Lending Tree

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

Loan Range: Up to $300,000
Minimum Income: Varies
Interest Rate: 3.97% - 4.99%
Term lengths: Up to 60 months
Good for: People with no credit history,
have a repossession or with bankruptcies

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

Lending Tree is connected with auto lenders that offer loans up to $300,000, and you can get up to 60 months to repay the loan. Interest rates start as low as 3.97 percent and often top out around 4.99 percent, though your income and credit score may affect this amount. You can use the loan for new and used cars as well as refinancing and lease buyouts.

Pros

New and used cars
Refinancing and lease buyout
Up to 60 months to repay
The large network of lenders
No minimum credit score

Cons

Terms vary between lenders
Hard credit hit

7. CarLoan.com

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

Loan Range: $1,000 to $45,000
Minimum Income: $1,500
Interest Rate: 13.97% - 25%
Term lengths: 12 months to 84 months
Minimum credit score: 300

CarLoan.com has access to loans ranging from $1,000 up to $45,000. Interest rates start as low as 13.97 percent but- like all other auto loan companies- your interest will depend on your credit score. Repayment terms go all the way up to 84 months for qualifying loans. The only real downside is that the process is not completely online. An agent will contact you to finish up the application. This kind of takes away the convenience factor, but it is still a good option to consider.

Pros

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

Cons

Some dealings with an agent
Interest can get high

Before You Apply

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

Granted, that down payment may be a bit steep for some people with low income and little time to save, but you should still try to have a good down payment to minimize what you need to borrow.

Making and living by a budget is the key to all financial goals. With a car budget, you can determine how much you have available for monthly auto loan payments. The amount you have available will depend on your bills and income.

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

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

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

Conclusion

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

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

Brandy Woodfolk

Brandy Woodfolk is an educator, home business owner, project manager, and lifelong learner. After a less than stellar financial upbringing, Brandy dedicated her schooling and independent studies to financial literacy. She quickly became the go-to among family, friends, and acquaintances for everything finance. Her inner circle loves to joke that she is an expert at “budgeting to the penny”. Brandy dedicates a large portion of her time to teaching parents how to succeed financially without sacrificing time with their little ones. She also teaches classes to homeschooled teenagers about finances and other life skills they need to succeed as adults.

Brandy writes about smart money management and wealth building in simple and relatable ways so all who wish to can understand the world of finance.

www.linkedin.com/in/brandy-m-woodfolk/

Drive Away Lease Buyout Auto Loans Explained

Posted on November 28, 2019 | by Kevin Strauss

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

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

Why Lease a Car in the First Place?

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

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

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

✓

Lower Monthly Payments

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

✓

A New Car Every Few Years

Many people love the feeling of driving away in a brand new vehicle, and if this is you then leasing can be the way to go.

✓

Worry-Free Maintenance

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

✓

Maximize Tax Deductions

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

✓

No Resale Worries

If you are the type of person who hates to haggle then you don’t have to worry about this with a lease.

How Do Lease Buyout Auto Loans Work?

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

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

Qualifying for Lease Buyout Auto Loans

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

Good Payment History

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

Good Credit

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

Your Lease Terms

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

Down Payment

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

Titles

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

Documentation

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

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

Determining the Market Value for Your Car

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

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

How to Get a Lease Buyout Auto Loan

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

Contact Your Leasing Company

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

Shop Around

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

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

Close on the Loan

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

Customer and salesman with car key outside.

What to Consider with Lease Buyout Auto Loans

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

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

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

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

Calculating Lease Buyout Rates

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

When Should You Buy Your Leased Car?

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

You Are Way Over or Under the Mileage Requirements

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

The Car Matches Your Lifestyle

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

The Car Has Excess Wear and Tear

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

You Can Negotiate a Reduced Buyout Price

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

Your Friend Will Want to Buy Your Leased Vehicle

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

You Like the Car

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

When Should You Not Buy Your Leased Vehicle?

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

The Car No Longer Matches Your Needs

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

It’s Not Affordable

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

If It’s Damaged

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

The Vehicle Is Worth Less than What Your Contract Says

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

Higher APR

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

Benefits of Buying Your Leased Vehicle

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

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

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

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

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

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

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

Lease End Versus Early Buyout

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

Early Termination Fees

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

Higher Payments

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

Taxes

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

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

Final Thoughts

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

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

Kevin Strauss

Kevin Strauss is a personal finance writer and homeowner based in the Los Angeles area. Being in one of the most expensive markets in the country, he’s learned to maximize resources to plan for both his monthly expenses and future financial needs. Kevin has a passion for helping those in a similar situation navigate the complex world of personal finance so they can pay down debt, plan for the future and live out their dreams. In addition to covering personal finance in depth on Loanry.com, Cashry.com, Debtry.com, Budgetry.com, Billry.com, Creditry.com and Taxry.com. Kevin shares his expertise with readers who want to create budget-friendly habits across the web.

Auto Refinancing to Help Save More Money

Posted on November 25, 2019 | by Blaine Koehn

When you think “refinancing,” there are probably two basic scenarios that come to mind. One is the possibility of refinancing your mortgage to lower your house payment or secure temporary cash to invest in home repair or improvements without adding to your monthly debt. The other is an overall debt consolidation of some sort – taking out one large personal loan to pay off credit cards and other debts in exchange for a single, lower monthly payment and hopefully a better interest rate and more manageable terms.

These are both completely valid refinancing scenarios and have proven useful to many people in many different situations. But they’re not the only time you might consider refinancing. Besides, you may have a great interest rate on your home and it would be counterproductive to rock that boat. You may have your monthly bills under control and don’t need to get too carried away with how you’re handling them.

But how are those car payments looking these days? Are you wishing you’d managed to negotiate a better price or lower interest rate? Regretting taking on that second or third payment before the first one was completely paid off? Maybe your financial situation has changed and you need to lower your monthly payments. Maybe your credit rating has improved and you qualify for a better interest rate or other terms now. Or maybe you took advantage of some sort of promotional dealer financing that looked great for the first few months and then the small print kicked in and it suddenly didn’t look so great anymore.

Auto refinancing is a valid option whatever your situation. It’s not for everyone in every situation, but it’s worth looking at long enough to decide whether or not it’s right for you right now.

How Do I Shop For Auto Refinancing?

Shopping for auto refinancing is not all that different from shopping auto lenders before you buy a vehicle to begin with. You’re going to look for lenders willing to listen to your needs, offer flexible terms and competitive auto loan rates, and make things convenient for you, the customer.

Just like when you borrowed the first time, your credit rating and credit history will be major factors in determining what sort of terms you can secure. Auto lenders will often more heavily weight your history with auto payments specifically when calculating your credit score. They’re less concerned with what you might owe the hospital or the apartment complex you lived in last year than whether or not you have a strong track record of making your car or truck payments.

The same is true for auto refinancing. Your overall credit rating matters, but your history of car or truck payments matters a little bit more.

Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac? ~ George Carlin

Just like borrowing the first time, you’ll want to take some time before applying to calculate what you can reasonably afford. Although in most cases auto refinancing is intended to reduce monthly debt rather than take on more, extending the life of the loan might mean paying more in the long term. Or, there may be refinancing fees or other charges up front to consider, even if overall you’ll save by making the change.

Finally, gather your documentation ahead of time to simplify the process. All the usual items – proof of income and employment, any outstanding debts or assets, etc. You’ll also want records of the auto loan or loans you wish to refinance. What did each vehicle cost? What were the terms? How much have you paid? What’s the balance on each loan? Having this information prepared and ready helps keep things moving and might even help persuade the lender that you’re a bit more reliable than most.

You never know.

Americans will put up with anything provided it doesn’t block traffic. ~ Dan Rather

Why Consider Online Refinancing?

It’s probably no surprise to you that we’re pretty big fans of online lending and online auto refinancing. You may not know exactly why, however.

There’s certainly nothing wrong with talking to your local bank or credit union. If they offer you the best rates and favorable terms, that’s awesome – go for it. They sometimes run specials or go the extra mile to try to bring in new customers in hopes you’ll do the rest of your banking with them as well. Just like with any loan or other financial decision, check out all of your options before committing!

Let’s look at some of the reasons online auto loan shopping and refinancing might be the best option for you.

Flexibility with Auto Refinancing (or Anything Else)

Many online lenders are able to offer more flexible terms and often better interest rates because they were designed to be nimble. They may have low overhead, no nice brick buildings near the mall with fancy lobbies and public restrooms to maintain. A number of them specialize in specific types of loans or customers, meaning they don’t have to be all things to all people.

An online lender who deals primarily in auto financing or auto refinancing and who specializes in customers with limited credit or poor credit is able to focus all of their resources, training, knowledge, and creativity into that segment of the financial world. Of course they can do it more efficiently and flexibly – it’s literally the focus of what they do. It might be ALL they do.

The Convenience of Online Auto Refinancing

It’s simply SO convenient to auto finance (or auto refinance) online. You don’t have to dress up or get to any particular office at any particular time. There’s no waiting in the lobby reading old magazines and no sitting across the desk from a guy in a suit who asks you way too many questions then types for a long time without telling you what’s happening. Online auto refinancing can be handled on your schedule, at your pace, and on your terms. Very often, the money is in your account within 24 hours.

Don’t confuse reputable online lenders with the sort of sketchy payday loan storefronts you pass next to the liquor store or any of those “quickie cash” signs flashing outside the gas station with the bars in the window. Of course the same sorts of iffy operations exist online – it’s the internet. That’s why we here at Loanry go to great lengths to maintain a curated database of legit lenders and what they do – so we can connect you to those most likely to meet your needs.

What you work out with them from there, of course, is entirely up to you.

The American really loves nothing but his automobile: not his wife, his child, his country, nor even his bank account first... but his motor-car. Because the automobile has become our national sex symbol. We cannot really enjoy anything unless we can go up an alley for it. ~ William Faulkner

Where Should I Start With Refinancing an Auto Loan?

Before contacting lenders, look at your current vehicle payment(s) as part of your overall budget. How much are you bringing in each month, and how much is going out? Just as importantly, where is it going? If you don’t have a fairly detailed household budget, you should make one. I’ve belabored this point elsewhere, so I won’t badger you about it too much right now, but let’s be honest – you really shouldn’t even be talking about auto refinancing or any other kind of major financial decision unless you have a pretty good handle on your exact fiscal situation now and for the foreseeable future.

Can you tell I’m giving you a very serious “I hope you’re taking me seriously about this part” look right now?

Next, take advantage of our auto loan calculator to see just how much you could save (or not) by refinancing. It’s often helpful to have a general idea of what sorts of numbers you’re talking, particularly when comparing interest rates or factoring in upfront charges.

Other Considerations

Remember that while you’re probably not dealing with down payments or trade-ins when you’re looking at auto refinancing, there are still other factors besides interest rate which impact the total cost of the loan. Perhaps the most overlooked, despite being one of the biggest, is the length of the loan.

Stretching out the number of months over which you repay what you’ve borrowed certainly lowers your monthly payments. Over time, however, you’re paying much more in interest – not because the rate is higher, but because it’s being calculated over a longer length of time.

NPR recently did a piece on the growing popularity of seven-year car loans:

A seven-year car loan means lower monthly payments than a three- or five-year loan... A third of all new car loans now have terms longer than six years, according to the credit reporting company Experian. That's more than three times as big a share of the loan market as a decade ago.

Hey, at least you’re not alone, right?

But while these loans are popular, they're probably not the best personal finance move... Longer-term loans usually have higher interest rates — and you're paying longer...

And if you want to sell your existing car — maybe you have another child and need a minivan — with a seven-year loan you are much more likely to be stuck still owing a lot more than the car is worth.

Sometimes this sort of compromise is necessary in order to manage your many obligations. If so, that’s fine. Monthly payments matter, and it’s better to pay a little more over the long term than risk not being able to make your payments on time every month. Just be aware of the trade-off so the decision you’re making is an informed one.

On the other hand, the article goes on to explain that much of the time, the issue isn’t rising car prices. It’s that buyers want more car or truck than they could otherwise afford. In other words, many times, the issue isn’t need so much as greed.

Anything Else I Should Watch For when Refinancing?

Pay attention to any refinancing fees or other upfront charges. Make sure you know what sorts of charges are involved if you’re late on a payment (we never plan on being late, but it’s still best to know). Ask also about the lender’s policies regarding overpayment or early pay-offs. Some companies love it when you pay extra or pay back the loan early; others not so much.

Obviously, if you’re looking at auto refinancing, you probably already have one or more auto loans which you negotiated, or at least considered while someone else laid out the details, at some point in the past. You apparently signed the dotted lines, because you’re here now considering reworking them a bit.

That said, some of us manage to get pretty deep in the process without fully understanding all of the details (and not just when it comes to auto loans). If you’re considering refinancing but still have questions about how you got here in the first place, it’s probably not a bad idea to revisit a few auto loan basics before moving along any further.

Did You Know?

The total amount owed by Americans on their personal vehicles is over $1.4 trillion at the moment, and the number of those getting behind on their payments is rising. Around 6.5% of vehicle loans are currently 90 days or more late.

Once You’ve Refinanced

Now that you’ve rebooted your loan, there are a few pitfalls to avoid. I’m sure YOU won’t be tempted by any of them, but other folks sometimes are, so I feel obligated to cover them.

The first is that if your auto refinancing went well, your monthly payments have probably gone down. And before long, your credit rating may start to go up. That means you’ll soon have the option of spending more than you have been on other things. Or taking on more debt now that you’re not so buried as you were only a few short months ago. You may be offered some pretty sweet terms on new credit cards or some pretty special deals on another vehicle.

I hope you’ll allow me to be blunt.

Dude. Just don’t even. You’re doing so well – why go backwards now? That big-ticket item you want to charge and that new debt you want to take on are like tequila and Jello shots for a recovering alcoholic. They’re chocolate pecan pie and Double Stuff Oreos in the second week of your diet.

I’m not suggesting you deny yourself life’s essentials, or that you can never charge again. But keep thinking big picture. You want to be free of excessive debt. You want to have options when it really matters. And you want access to low-interest funds on reasonable terms when it’s time to pay for that wedding, those medical bills, that vacation, those repairs, that remodeling. Fiscal responsibility isn’t about making sure you stay miserable and deprived – it’s about being intentional and making sure that what you’re CHOOSING is actually moving you closer to what you actually WANT.

It’s not about my rules or what I’d buy. It’s about why you’re working so hard to begin with. And it’s about where you want to be in six months, and in two years, and at retirement.

If you think nobody cares if you’re alive, try missing a couple of car payments. ~ Earl Wilson

Fresh Starts and Timely Payments

The other thing to avoid is getting careless with your wonderful new refinancing loan. Whether you got a great auto refinancing deal thanks to your good credit or whether you had to accept a few fees and a slightly less impressive interest rate because you have poor credit, you are now going forward one way or the other. Your credit history and credit rating will get better or worse based on how you repay this loan (they rarely stay the same).

If you realize you’re going to be late, contact the lender before the due date. That doesn’t make it OK, but calling is always better than not calling. If you realize you can’t make the full payment, make part of a payment. That doesn’t make it “not late,” but paying some is almost always better than paying none.

Ideally, of course, you make the payments on time. Every time. Wherever you started, you’d be surprised how quickly your credit improves when you do this. That is, in fact, the whole idea.

Conclusion

Auto refinancing isn’t the answer for everyone, but it’s worth looking at and something we don’t always consider. Our hope at Loanry is that whatever you decide about your car or truck payments, it will be part of your larger journey towards financial security and informed personal money management.

We’re happy to help you find the right loan and connect you to some great online lenders. Let’s not downplay the power of getting some of that auto debt under control. Or re-negotiating some of those terms and rates.

Even a successful refinancing isn’t always enough all by itself to turn today’s struggle into long-term, ongoing success. That’s why at Goalry we offer a range of financial blogs, online tools, and personal organizational services. We care about your debt, but we also care about helping you create and maintain a useful budget. And appropriately invest your wealth, and manage your personal or small business taxes, and…

Well, you get the idea.

There aren’t always easy answers. We certainly aren’t trying to do everything for you or even tell you what to do in all situations. We just have this crazy idea that life is complicated enough, and personal finance doesn’t have to be. It at least doesn’t have to be as hard as it sometimes seems.

Blaine Koehn

Blaine Koehn is a former small business manager, long-time educator, and seasoned consultant. He’s worked in both the public and private sectors while riding the ups-and-downs of self-employment and independent contracting for nearly two decades. His self-published resources have been utilized by thousands of educators as he’s shared his experiences and ideas in workshops across the Midwest. Blaine writes about money management and decision-making for those new to the world of finance or anyone simply sorting through their fiscal options in complicated times.

How Do Car Payments Work: Follow This Lane

Posted on November 6, 2019 | by Julia Peoples

So you think you might want to buy a car? The thought of buying a car sounds exciting to me, well I should say the thought of having a new car is exciting to me. The thought of actually going through the process of buying the car makes me feel sick to my stomach. I am not exaggerating. It truly makes me feel like I have a rock in my stomach. The process takes so long. I cannot tell you how many times I have spent my whole day at a car dealership. With the technology of today, it just should not take that long.

Car buying seems to be the one thing that has not gotten faster with time. These feelings begin before I even think about the car payments. For me, car buying is a tense and uncomfortable situation. It does not have to be that way. You can be prepared. And you can have your loan in order. You can get in and out of the dealership in a few hours, instead of being there all day. Continue reading to learn some of the tips I have picked up over the years about car buying and car payments.

What Is An Auto Loan?

An auto loan is sort of like a personal loan, but at the same time, it is not. Like a personal loan, you can get an auto loan through a credit union or a bank. Unlike a personal loan, you can also get an auto loan through the car dealership. When you get the loan through the car dealership, sometimes they have their own finance group and it is through them, like Honda. Other times, the car dealership uses a lending source other than themselves. It completely depends on the dealership.

A Point to Consider When You Obtain an Auto Loan

You should consider that the lender makes you have full coverage auto insurance. They really do not give you a choice in the matter. If you want a loan through them, you must have full coverage. They want to make sure the car is fully protected in the event of an accident. After all, the lender has a vested interest in what happens to the car as long as you making car payments to them.

If you have a good credit score, you will receive a lower interest rate. Since the car is collateral, the lender is not taking as big of a risk by lending you money. Auto loan repayment schedules are often longer than a typical personal loan. You can take up to seven years, or longer, to pay back some auto loans. This may help to reduce the amount you pay each month. However, that also means you are paying the loan for seven years and therefore stuck with the vehicle.

How Do I Make My Payments?

This could depend on a number of different factors. The main factor being the lender. The lender often dictates how and when you make your car payments. Some lenders want to debit your car payments directly from your bank account. If you are someone like me, this is a great plan. I prefer to have the money come out of my account automatically so that I do not have to do anything. I put a reminder on my phone a couple of days in advance to remind me the money is coming out of my account. This way I can double check my account to make sure the money is there and I am all set.

Now, if you are someone that never has money in their bank account, this might not work for you. I know several people that move most of their money to an interest savings account and pay for everything with a credit card. When it comes time to pay the bill, they move the amount of money they need from their savings to the checking and pay one bill, the credit card bill. This way they are always earning interest on what is in their savings account. They only pay one bill from their savings account. They feel this is a safer way to pay for things. Everything is paid with the credit card. It works for them and it seems like a good system for them. It is not for everyone.

However, this means that they rarely have any money in their checking account. Some bills, or loans cannot be paid with a credit card, so this bill may have to come directly from a bank account. It really depends on the lender. These are details you should determine before you sign any paperwork or agree to any type of loan.

How Does Interest Impact My Payment?

The simple answer is simple, the higher your interest rate means the higher your car payments. The opposite of that is also true, which is the lower your interest rate means the lower your car payments. Your credit score drives your interest rate. You should understand a few things about interest rates first. The amount you want to borrow is called the principle. Lenders added the interest rate on top of the principle amount you borrow. Lenders that see loans as a lower risk are given a lower interest rate. It is better to get good credit auto loans so you can have a lower interest rate.

Can I Use A Credit Card?

You most likely can use a credit card to buy a car and then you would not have any car payments. Depending on the dealership, they may have some restrictions on using a credit card. They may not let you use a credit card to purchase a car. There is a fee issued to the dealership by the credit card company when you use a credit card. The fee is 1 percent to 3 percent. The dealership may not want to pay that fee. Also the dealership makes money when you finance a car through them instead of paying for it in full.

A car is expensive, so if you use a credit card, you are putting a lot of debt on it. If your credit card has a high interest rate, you may not be able to afford to pay the balance. In this case, you could receive hefty interest charges. Those credit card charges may be higher than if you applied for an auto loan. If you have a credit card offering 0 percent interest with enough available credit, it could be a good idea to use a credit card. If you cannot pay off the credit card before the special interest ends, you could get all of those interest charges.

An Auto Loan is Considered a Secured Loan

This is because the car you are buying becomes collateral. This means that if for whatever reason, you do not pay the loan, the lender can, and certainly will, take possession of the car. The lender technically owns the car until the time you pay off the loan. When you pay it off, you get the title and it becomes yours.

Can I Pay Cash?

Well, you certainly could pay for a new car in cash. This would prevent you from making car payments. It may not be the best way to buy a car. You must take a few things into consideration. One is that a car is going to depreciate as soon as you drive it off the car lot. It could end up that if you finance the entire amount of the car because you do not have a down payment, at some point you owe more on the car than it is worth. For this reason, it may make better sense to pay cash for the car so that you own it outright.

However, if you have enough money to pay cash for the car, better use of the money might be to put it in an account where it can earn interest and grow. You could take out a loan and pay the monthly payments with the amount you have in a savings account. However, what might make the most sense is if you take half of the money and put it as a down payment for the vehicle. This way you are only financing half of the cost of the car. The car value is still more than what you owe and you are able to put some money in a savings account and let it gain interest. This also keeps your car payments low.

How Do I Know If I Can Afford An Auto Loan Payment?

This is a fairly important question. It is really important to know if you can pay the monthly car payments before you agree to the loan. You are putting yourself in a terrible position if you do not verify this first. Honestly, the best way to know if you can afford to repay the loan is to look at your budget. What? You do not have a budget. Is that what you just muttered under your breath? My first response is why not? My second response is you should get on that. All joking (not really) aside, you really should have a budget. It is the best way to understand your financial picture and in this case, know if you can afford to pay back a loan.

If you do not have a budget, you can quickly put one together. A quick way to do this is list all your income in one column. Then list all your expenses in a separate column. Add up all of your expenses and subtract it from your income. Hopefully you have a positive number. If you have a negative number, you should stop here. Buying a car is not for you right now. Perhaps you should consider cutting some of your expenses before you buy a car.

Once you figure out your budget, you can use an online auto loan estimator. This helps you determine how much an auto loan will cost you each month. You can input the vehicle amount, the interest, and the length of the loan. Also, you can adjust these numbers and see how they change your monthly payment amount. You can compare this number to what your budget is telling you that you can afford. Hopefully this number is not more than what you can afford. If so, do not buy this car. Find a cheaper one.

Can I Negotiate?

When I was younger, I did not realize things, such as interest rates and car payments, were negotiable. I have since learned that if you are willing to haggle, you just might find yourself a better deal. I have also learned that it is a smart idea to negotiate the terms of my loan. You can negotiate many aspects of your loan, including pre-penalty payment, loan origination fees, and the overall length of the loan, in addition to the interest rate. You are also able to negotiate the warranty and free upgrades. If you are trading in a car, you can negotiate the value of the trade in.

There is a way to negotiate the cost and value of all of these items without being a jerk about it. You do not know what the dealer is willing to give you until you ask. Lenders are not going to give you the best terms outright. Remember, they are in the business to make a profit. The more discounts and deals they give you, the less of a profit they are going to make.

Can I Get An Auto Loan Through A Car Dealer?

Yes, I briefly mentioned early that you can obtain an auto loan through the dealer. Many people often pay for their cars this way. It is a convenient way to get an auto loan. Since you are already at the dealership, you can get the loan there and not have to deal with any other lender. Every time I have bought a car, I did not go into the dealer planning to leave with a new car. It just happened. Since I was not prepared to buy a car, I had not gotten any type of financing for the car. I had to get my financing through the dealer.

This can be a blessing and a curse. It is incredibly convenient to have the car and financing all in one place. Due to its convenience, I never knew if I was really getting the best deal I could find. I did not do an auto loan shopping, so I just took what was offered. Maybe I could have gotten a better deal somewhere else with lower car payments, but I will never know. I cannot go back and change the past, but I know now for any future cars I purchase. You can also learn from my mistakes. Do not take the first option that comes your way. It may be the best deal, but do some research first and find out.

What If I Have Bad Credit?

You should prepare yourself now, if you have bad credit, you will have to pay a higher interest charge which means your car payments will be higher. If you already think you have bad credit, there must be some reason why you feel that way. You should pull your credit report. You are entitled to one free copy of your credit report per year.

It is possible to get auto finance if you have bad credit, however, you may have to work harder for it. You may have to do some research to find the right auto lenders for you. It is important to make sure whatever you loan you take that you can repay it. The worst thing you can do is get a loan that you cannot afford. You just put yourself in a worse place financially. You can check right now whether there is a reputable lender out there who would give you a loan in your situation.

What Is The Process For An Auto Loan?

I have talked a lot about how time consuming it is to buy a car, but I have not told you much about the process itself. Your experience may be a little different from dealer to dealer, but the basic parts remain the same. You can also save yourself time and money by doing some research ahead of going to the dealership. And you can determine if you qualify for a better loan from another lender. You can research exactly what vehicle you want and all the upgrades and features it needs to have. Let us say that you have picked out your exact car and you know that you want to finance it through the dealer.

Most dealers have a finance department that handles the financing right there. The upside to this is someone is always available no matter the time or day. The downside is it may only be one person for the entire dealership, or several dealerships. This is where the time comes in. There is a lot of sitting around for you while you wait. You pick out your exact car and fill out all the loan paperwork. Someone whisks off the car to detail it and check it over one last time. The finance person sits down with you and tells you what he can offer you, including the amount of your car payments. He goes off to work some magic, although it is slow magic. He gets everything processed and hopefully your car is ready to go when you are. That is the basic process of buying a car.

Vault or Safe box with coin stacks

Should I Save The Money?

Saving money is always a good idea. As a general rule of thumb, you should already be saving money.

That is one way to handle purchasing a new car. It prevents you from taking out more debt. It prevents you from having to make car payments. If something unexpected happens one month and you cannot afford to save the money, then you do not really lose anything. It may take you a little longer to save, but you are not hurting your credit or your finances. I hate to say there are any downsides here because I do not want to deter any one from saving money.

There are some points to consider. Car prices keep rising, so you have to be careful in the amount you are saving each month to ensure it will be the amount you need. You have to be dedicated to saving the money. Otherwise there may always be something more important that pops up. I think it is an excellent way to save money for a car and certainly could decrease the amount you pay in monthly payments.

Conclusion

I have walked you through the good and the bad of car payments. I do everything I can to avoid car payments, but I realize it is a necessity. Make sure you make smart and informed decisions when it comes to buying your next car.

Julia Peoples

Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.

Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.

How to Save Money on Your Auto Loan

Posted on October 26, 2019 | by Kevin Strauss

Buying a car is one of the most expensive purchases you will make. Although you may not be able to do anything about the rising auto prices, you can save money on your auto loan by lowering the interest rate you will pay. When using auto finance options to pay for a vehicle, you will end up paying a higher amount when compared to the actual value, thanks to the interest. By the time you finish paying of the loan, the value of the vehicle has gone down significantly from when you bought it. Paying with cash may be a better way to purchase a vehicle but it’s just not a reality for most people.

Ways to Cut the Cost of an Auto Loan

If you are hoping to save money on your auto loan, there are some ways you can cut down on the costs.

Work on Your Credit

The terms of an auto loan will be based on your credit. If you have perfect credit then it’s easier for you to get the lowest interest rate. But if you don’t then you may have to pay more. If there are issues with your credit and you don’t need to get a new car right now then consider waiting until you can work on your score. Just a small decrease in the interest rate can save you a lot of money over the lifetime of the loan.

Don’t Borrow Too Little

If you only need a few thousand dollars to purchase a new vehicle then don’t get an auto loan. Instead, save money. Since small loans are paid off quicker than larger loans, the bank doesn’t make as much money. Smaller loans will have a higher interest rate than bigger loans so the bank can make more money off you. If the car purchase is an emergency then this may be the only option you have.

Refinancing Your Auto Loan

One of the ways to save money on your auto loan is by refinancing. You need to carefully look at your current situation to see if you are actually getting a better deal.

The first step is finding how much you owe on your existing loan. Then find out how much interest you will pay on the existing loan. Add together the remaining amount owed and the estimated interest payment and this is the number you want to beat with your new loan.

Don’t Get a Loan at the Dealership

The dealership is the middleman when selling you a car and also the middleman when you are set up with a lease or loan. Middlemen always get paid and the person that is paying is you. You should get a financing quote from the dealer because it may be a good option but if you don’t get other quotes, you could be paying too much money. You are doing some shopping around for your car so you should do the same for the loan.

Buy a Cheaper Car

This may seem like obvious advice but many people are in a habit of purchasing more than they can afford. Do you need to purchase a new car or can you get a pre-owned model? Do you really need a luxury car that will just put you more in debt? It’s worth considering if you are looking to save money on your auto loan.

Will I Save More Money if I Lease or Buy?

Buying a new car can be overwhelming and one of the decisions you are faced with is whether or not to lease or buy.

Buying a Car

Purchasing a car is one of the straightforward ways of getting it and you either pay cash or use a loan to cover the cost. The great benefit of buying a car is that one day you will own it and be free of vehicle payments until you decide to purchase another one. The car can be yours to sell at any time and you won’t be locked into a fixed ownership premium.

Car insurance premiums can be lower and you don’t have to worry about any mileage restrictions. The downside is that there will be a higher monthly payment. Dealers may also require a down payment so out-of-pocket costs will be higher when buying a car. As you pay down the loan you have the ability to build equity in the car. However, this may not be the case since depreciation can take a toll on the value. Buyers with down payments can find themselves in an upside-down situation where the car is worth less than what the buyer owes.

Leasing a Car

For those who haven’t leased before, the process can seem confusing. There are some benefits to leasing a car. The greatest advantage is the lower out-of-pocket cost when maintaining and acquiring the car. Leases don’t require much of a down payment and the monthly payments are usually lower. You also get the advantage of getting a new car every few years.

The drawback is you have a payment but you never get to own the vehicle. Depending on the lease you choose, when the term is up you could have the option of financing the remaining value, which means you will own it once you finish making payments.

Mileage restrictions also are another disadvantage. If you drive a lot during the year then buying a car may be a better choice. If you do drive a lot, there could be the option for an open-ended lease, which may not have as many mileage restrictions. You may get charged more for insurance for lease vehicles. Depending on your driving record, age, and where you live, the additional cost may be small but it’s still something to consider.

How to Shop for an Auto Loan

In order to save money on your auto loan, you have to shop around and shop smart.

Shop the Loan Separately from the Car

Before you start negotiating the extra features, price, and car you want, start the loan application process with banks, credit unions, and other well-respected online lenders. Banks may be the best, especially smaller ones. Credit unions are also a good choice. You can get prequalification for a loan, which then allows you to go to the dealer with a blank check for the specified amount. Once you have a solid written contract with the dealer then you can get a good financing deal. Use an auto loan estimator to help with the shopping process.

Look at Your Own Credit History

Be sure to get copies of your credit report from the three main agencies. With an auto loan, you may have some more wiggle room in terms of your score as opposed to a mortgage. If you are looking for auto loans for bad credit online may be your best option.

Read the Fine Print

It’s best to take the loan paperwork home and read it before signing anything. If the dealer or lender won’t let you do this then walk away from the offer. A loan is a binding agreement that will last you for years so you need to know what’s in it. There are some things that warrant some special attention. If you see mandatory binding arbitration, know that this will take your right to court to court away.

A variable interest rate could mean that you end up with a high payment. Find the highest possible payment and see if you can afford it. If you can’t then the loan isn’t right for you. See if there are any prepayment penalties. Learn how much it costs you if you want to pay off the loan early or refinance it. Is what the lender promised you in the contract? Oral promises can be impossible to enforce so you need to make sure it’s in the written paperwork.

Investigate the Lender

Check on any lender you are dealing with ahead of time. Search online to learn what any customers or former customers are saying. While online comments should be taken with caution, you may be able to use them as an early warning for any possible problems. You can also consult with us about your lender choice.

Mistakes You Could Be Making with Your Auto Loan

If you want to save on your auto loan, you should avoid making some of these common mistakes.

Not Investigating All Your Options. The key to saving the most money with an auto loan is to investigate all your potential lending options and this can include the dealership.
Going by the Rate Alone. The rate is only part of the equation. You also need to know how much of a down payment is required and the terms of the loan before you make a decision.
Not Reviewing Your Credit Score First. Know what your score is so you now what the lender is looking at. If there are any errors on your credit report, you can get them fixed beforehand.
Being Quick to Accept the Dealership’s Offer. Dealerships may offer a higher rate because they get financing from banks. They raise the rates to make a profit so it’s always necessary to shop around.
Focusing on the Payments over Price. If you are more focused on the monthly payments than the overall price of the car, you could be paying more in the long run. Consider the price of the car, the terms, length of the loan, and the APR.
Looking for a Car First. If you are serous about getting a car, you need to start shopping around for financing first and determine how much you can afford before you start car shopping.
Not Taking the Shorter Loan Term. Cars depreciate rather quickly so you want to finish paying off the loan in the shortest amount of time. Monthly payments will be higher with shorter-term loans but you will also be paying less in interest.
Not Determining What You Can Afford. When it comes to car buying, not everyone takes the payments into careful consideration. Since it may only be for three years, you may not evaluate the impact these payments have on your budget but you need to. Before you buy a car, you need to determine how much you can put down and how much you can spend according to your monthly budget.

Ways to Pay Off Your Car Loan Early

A typical car loan can take you 60 to 72 months to pay off, which equals five to six years. That is a lot of interest to pay so if you want to pay off the loan faster and save money on your auto loan with interest, there are some things you can do.

Pay Half Your Monthly Payment Every Two Weeks

If your lender lets you do this then you should consider it. When you pay every two weeks, you are actually making 26 half payments throughout the year, which adds up to 13 full payments instead of 12. While you may not save you as much on your auto loan, you will be able to repay the loan much faster. This amounts to months that you can get back for your life and it’s not a bad transition if you get paid every two weeks.

Round Up

Instead of just paying your payment, round up to the nearest $50 to help repay the loan quicker. This can also help you save money on your auto loan. For example, if you have a $10,000 loan with a 10% interest rate for 60 months, the monthly payment is about $412. If you round up and pay $450 then you will have paid the loan in 47 months instead of 60 and can save over $2,000 in interest.

Make One Large Payment Every Year

This is a similar version to rounding up. It doesn’t matter when you make the payment and it can help you save money on your auto loan.

Make at Least One Large Payment on the Loan

If you make at least one large extra payment each year, you can save even more on interest and save money on your auto loan. The earlier you make a big payment, the sooner you will be able to pay off the car loan.

Never Skip Payments

Even though some lenders may let you skip a payment once or twice a year, it’s best to resist the temptation. Skipping payments doesn’t save you money on your auto loan. It instead lengthens the term of the loan and will cost you more in interest.

Refinance the Loan

You can negotiate a new monthly payment and pay off date when you refinance your loan. In order to save money on your auto loan, you should only do this if you actually get a lower monthly payment and a sooner pay off date. Refinancing may sometimes not make sense. You don’t want to just lower your monthly payment and lengthen the loan term since you will end up paying the same principal and then more in interest.

Final Thoughts

When you want to save money on your auto loan, there are different things you can do. First, look at ways to pay off your car early. Since this will lessen the amount of interest you are paying. Having a down payment can lessen how much you have to borrow so it helps to know how to save for a car. Know the steps to shopping for an auto loan so you can get the best deal possible. Refinancing may be an option to save money on your auto loan. But you need to make sure the situation will make sense for you. Also know what common mistakes you could be making so you don’t get stuck in a financing trap.

Kevin Strauss

5 Things to Know When Financing a Car

Posted on August 28, 2019 | by Cole Lehman | Leave a Comment

One of the most important decisions that consumers have to make when looking for a car loan relates to the lender they should work with. With the numerous auto finance options available, the process can be confusing and overwhelming. The good news is that prospective car owners can work with a third party that is not in the loan business to find a lender. We make it easy for consumers to identify and find lenders so they can enjoy a hassle-free borrowing experience. In addition, we strive to ensure that you have the information you need to help you make the right decisions. In order to ensure proper financial management, here are a few things to know when financing a car.

5 Things to Know When Financing a Car

The prospect of buying a new car can be exciting. But it is important for consumers to prepare themselves before heading to the dealership. This will help them save both money and time. Also, they will avoid the frustrations that come with a stressful car buying process. Adequate preparation means putting finances in order as well as familiarizing themselves with the important things to know when financing a car. Here is part of the information that can be of help when it comes to vehicle finance.

The Rate You Are Approved for

One of the decisions prospective car buyers have to make has a lot to do with how they will finance the car. To ensure a seamless process, consumers should consider doing this in good time. That is before they select the car they wish to buy. When exploring financing options, borrowers should be aware of the loan terms offered by different lenders. This means looking at the financial institution that offers, among others, the lowest interest rate. Although the rate you are approved for is one of the most crucial things to know when financing a car, borrowers should also be aware of factors that affect the interest rate.

Just as with other types of loans, the better the credit history, the better the interest rate that borrowers are likely to get on their auto loan. Another point to remember is that although an annual percentage rate of zero percent may be enticing, the terms of the loan could translate to higher monthly payments.

Auto Loan Rates in April 2022

Credit Score	New Car Loan	Used Car Loan	Refinance Car Loan
750 or higher	6.33%	6.58%	3.38%
700-749	10.64%	10.89%	4.32%
600-699	14.27%	14.52%	6.74%
451-599	17.52%	17.77%	9.39%
450 or lower	n/a	n/a	n/a

Factors That Impact Your Payment

Before taking out a loan, borrowers should always determine how much they will be paying monthly as well as the cost of the loan. These two factors are necessary for helping to establish whether the individual will afford the loan. However, borrowers should go further to understand the inputs that will influence their payment.

Taking a large loan amount will mean high interest in the long run. This may also be accompanied by high monthly installment payments. The down payment made will also have an impact on how much the borrower pays back. Generally, borrowers will have lower monthly payments when they make a higher down payment. Borrowers should remember that while longer loan terms will lower monthly payments, they will end up paying more over the life of the loan.

Since some borrowers may find these factors to be confusing, they should consider seeking the advice and guidance of financial experts. The professional can help consumers make the right choices and manage their debt better.

Determine Whether New or Used is Right for You

This is one of the most commonly overlooked but essential things to know when financing a car. A good number of people tend to make their decision based mainly on cost. But there are several other factors to take into account. Some of the issues you may have to think about include repair costs, the condition of the vehicle, the cost of maintenance, and depreciation.

The average term for auto loans is 69 months, in the case of new vehicles, and 65 months for second-hand cars.

In most cases, new vehicles will attract lower interest rates on auto loans. The vehicles are also associated with lower repair and maintenance costs. This is particularly critical to bear in mind. Because the borrower will be repaying their loan while at the same time running the car. Failure to calculate these costs may result in huge expenses. They could affect the borrower’s ability to repay the auto loan.

There is no right answer when it comes to making the decision between new and used. This will depend on the purpose for which you wish to buy the motor vehicle as well as your budget.

Accurate and Complete Documentation

Apart from credit score, there is a set of documentation that needs to be completed and submitted for verification. Making the process seamless will require that consumers ensure the information is accurate. Being aware of the documentation required will help to fulfill the approval for the auto loan.

Since requirements vary depending on the lender, borrowers can consider talking to a financing officer from their lender of choice. This enables them to prepare the documents prior to shopping for a car. This will hasten the process of buying the car. It will also provide leverage when it comes to negotiating with the car dealership. Some of the other documents that the lender may require include proof of income, identification proof, proof of residence, bank statements, and vehicle information.

Car dealer businessman signing car insurance document or lease paper.

EMI, Processing Fees and Foreclosure Charges

Some of the auto loans available in the market come with numerous charges and conditions. This is why it’s necessary for borrowers to go through the details. In addition to the above factors, borrowers should have a clear understanding of what they are getting themselves into when they decide to take out an auto loan.

Calculating the equal monthly installment, commonly known as EMI, will help them plan their payments. Financial experts also recommend looking at processing fees to determine the total cost of borrowing. In the event that the borrower cannot pay back the loan, they should know of the kind of foreclosure charges they will be required to pay. Knowledge of all these important factors will enable the consumer to play their finances in such a way that they will meet their obligations as required.

There are many more things to know when financing a car. For instance, borrowers should look out for any hidden extras in the bill of the vehicle they intend to purchase. In addition to shopping around for the best interest rates and checking their creditworthiness, consumers have to consider choosing their loan tenure wisely and scrutinize for offers.

The Impact of Credit Score

Just like with other types of loans, one of the essential things to know when financing a car is the impact of credit score. The borrower’s credit score plays a major role in determining whether they qualify for financing as well as the terms they will enjoy.

Credit scores affect many aspects of consumers’ lives. Apart from impacting loan eligibility, the credit score also influences how much the borrower will pay in interest charges. This means that a lower credit score will see the borrower pay more in interest. It is critical for consumers to obtain relevant information regarding their credit score to enable them to protect their credit score and obtain good auto loans.

The credit score is displayed on an individual’s credit report, a detailed listing that also shows how much debt they have and how they used the money. The credit report also shows the payment history and the loans the borrower may have defaulted on. In order for borrowers to increase their chances of qualifying for an auto loan and enjoying lower interest rates, they should consider building their creditworthiness.

Personal Loans versus Credit Card

When it comes to auto finance, there are numerous options that consumers can explore. However, before making a decision, the individual must understand what works for them. This will make it easier to settle on the option that will not only meet their needs but also ensure they repay the loan without much straining. Even as you seek to learn the important things to know when financing a car, you should also take time to compare personal loans and credit cards.

With personal loans, borrowers have many options open to them. In case a borrower can get a loan at a low-interest rate, they will enjoy significant savings and pay less money per month. Similarly, it is easier for borrowers to find a personal loan that fits their budget. Personal loans have fixed monthly installments, allowing borrowers to plan properly. At the same time, taking out a personal loan does not impact the balances on the borrower’s credit card, allowing them to use the card for emergency purposes and other uses.

Consumers can also consider using their credit card to purchase a car. One of the advantages associated with this decision is that the user will pay back only the amount that they used. Credit cards also have revolving credit, meaning that credit will be available to the user once they pay what they used. Choosing the best credit card and using it responsibly may also see the consumer enjoying the reward programs and special promotions offered by most of these cards.

Ways to Increase Your Chances of Getting Approved

Once a borrower knows what is financing a car, they should work on increasing their chances of getting approved. Although improving the credit score is important, there are several other ways through which consumers can ensure lenders will be willing to finance:

Borrow what you will afford to repay. Borrowers who apply for loan amounts that they can comfortably pay back have a higher chance of being approved for financing. This is why it is necessary to consider the income level as well as current debts before making the financial commitment.
Put up collateral. Another way to increase the likelihood of being approved is to put up collateral. This will serve as a guarantee to the bank that the borrower will pay back the loan. Collateral should be a tangible asset that can cover the loan amount.
Raise income. Almost every lender will look at the borrower’s income to determine whether they are eligible and how much they qualify for. Raising income by asking for a raise, doing a part-time job or a freelance business will give lenders the assurance that the loan will be repaid.
Request a loan officer meeting. A one-on-one meeting with the loan officer will give the borrower an opportunity to show important personal and financial information that is not captured in the credit report.

Once a borrower is familiar with the things to know when financing a car, it will be easier for them to secure the funding they need and manage their debt better.

Factors to Consider Before Taking out an Auto Loan

Choosing vehicle finance means huge financial commitment and responsibility. This is why prospective car owners should consider the option carefully before taking out the loans. Below are a few things to know when financing a car:

The need for a car. If one cannot afford a car at the time, they should carefully think about whether they actually need to buy one. Consumers can also consider alternative options such as walking to work, cycling, or carpooling. This will not only help them avoid paying interest on the loan but will also be good for their health.
How much is required to buy a car. Most lenders will offer borrowers more than they actually need. While the numbers may look good on paper, borrowers should only go for what they can afford. It is important to ensure that the loan amount is such that they will comfortably make all payments on time.
Comparing different options. The need to compare the different options available cannot be emphasized enough. Loan terms and interest rates vary widely from one lender to the other. Getting the best deal will require that borrowers compare these options.
Choose a car that meets your needs. When going through the things to know when financing a car, borrowers should ensure that the car they buy will meet their needs. This is particularly important when they choose dealership financing.

Getting a Car Loan with Bad Credit

Although credit scores impact loan eligibility, it is still possible to access vehicle finance with bad credit. There is no down that a good number of lenders will turn down applications from people with bad credit. The good news is that are a number of steps that such borrowers can take to increase their odds when it comes to obtaining car loans for bad credit.

Make a down payment. Saving money, whether to pay for a car in full or make a down payment, is not easy. However, it will make a huge interest in terms of interest rates, monthly payments, and the willingness of lenders to give you the money you need.
Get a co-signer. Getting someone with a stronger credit score to be a co-signer can also help borrowers with low credit scores to get a loan. In the event that the borrower repays the loan as scheduled, their credit score will improve without changing that of the co-signer.
Look over the credit report. It is important to check whether there are any errors and oversights on the credit score that could lower the credit score and limit the finance opportunities available.
Do not be fixated on monthly payments. Rather than focusing only on the monthly payments, borrowers should look at the overall loan terms. Other factors to consider include the duration of the loan and interest rates.

In addition to these things to know when financing a car, borrowers should consider researching financing options before shopping for the vehicle. This will entail using online calculators to understand the factors that affect loan payments.

How to Ensure You Make Payments on Time

The borrower has a duty to pay back the loan once they have received it. Failure to do that will not only have a negative impact on the individual’s credit score but could also result in additional charges and interest. Here are some tips to ensure that you make all payments on time:

Set up auto-pay – borrowers who are paid regularly from their jobs can consider setting up auto-pay. This will minimize the chances of falling behind on payments, especially when they are busy or out of town.
Put it on the calendar – life in the modern equals busy schedules. Similarly, there are other bills that one has to pay every month. To ensure that you do not forget to make the monthly payments, you can rely on calendars and planners to remind you of the event.
Control spending – buying a car through a loan comes with a serious financial commitment. If a consumer is to ensure that they make payments on time, they should not only control payments but also prioritize purchases. This will include making the most important payments before spending on other things.
Debt consolidation – there may be times when a borrower will have trouble paying their bills consistently. Consolidating or restructuring debt can help to lower the amount that is repaid monthly. In that way the loan is paid back comfortably.

An understanding of the things to know when financing a car will go a long way in helping consumers to manage both their finances and debt. Prospective car owners should try to ensure that the decisions they make will not lead to financial stress and troubles. Creating a budget is a must whenever you take out any loans, simply because this is the best way to organize your finances.

Conclusion

Financial education and literacy can help consumers to understand the things to know when financing a car. Such consumers will also have the skills and knowledge required to handle money in a better way. They can also manage debt in a manner that will help them reduce it over time. However, prospective car owners should not forget the importance of shopping around when looking for auto finance.

Doing a little research enables consumers to know the various options available and understand what each option means for them. Today, third parties make it easier for consumers to find lenders through online platforms. This simplifies the process of borrowing and minimizes the hassles that consumers experience. The next time you are looking to buy a car, kindly consider working with us to find a lender.

Cole Lehman

Cole is a personal finance research analyst and writer with extensive experience in building and maintaining a corporate brand utilizing both qualitative and quantitative methods. Cole has written on a diverse range of topics including financial planning, cryptocurrency, commercial real estate, and tax strategy. A graduate from Drexel University, Cole seeks to demystify financial borrowing and help individuals achieve financial freedom.

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

Posted on July 27, 2019 | by Julia Peoples | Leave a Comment

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

Can I Use A Personal Loan to Buy A Car?

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

What Is A Personal Loan?

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

Should I Buy A Car?

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

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

Woman inside her car gesticulate thumb up.

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

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

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

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

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

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

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

FAQ

Does My Budget Really Matter?

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

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

How Can I Budget For A Car?

Once you see your monthly expenses listed, you can begin to make adjustments. Often times, we do not even realize how much money we spend in a month until we write it down. Begin to eliminate unnecessary expenses, such as that gym membership that you are not using. You can also see some habits that you might be able to cut down.

For example, do you eat out often? It can be expensive and when it is listed for you, you can see just how expensive. Perhaps, you decide to eat out only two nights instead of five. That could be a significant savings for you each month, without much impact. Look for other ways to reduce spending to hit your budget for a car. These savings could add up to the money to pay for a personal loan to buy a used car.

What Does My Credit Have To Do With It?

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

Can I Improve My Credit?

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

How Do I Know Which Loan Is Right For Me?

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

Are There Other Options Besides A Personal Loan?

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

Conclusion

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

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

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

Julia Peoples