Unless you are independently wealthy, the chances are high that you will need to finance the purchase of a new or used vehicle. We first need to appreciate that any car represents a very real investment and the decisions you make today will have an outcome tomorrow and into the future. So, the majority of buyers tend to employ a car loan through the proper level of financing. Depending on the amount of money that you put down, these sums can be a few thousand pounds or well into the tens of thousands of pounds. How can you make sure that you are making the right decisions and what other metrics should you keep in the back of your mind?
What is the Best Way to Finance Buying a New Car?
Before you ever apply for any type of financing package, you must address three areas. These are:
- Whether or not you can afford the base monthly payments.
- The interest rates that will be charged over the lifespan of the loan.
- Whether or not these rates are fixed or they will change depending upon economic conditions.
Assuming that you can handle these areas, the next step is to consider what type of loan to apply for. There are actually many more varieties than you may think. A handful of popular types include:
- A personal loan
- A personal lease
- A Hire Purchase (the ability to repay the balance of the vehicle between one and five years is common here)
- A personal contract plan. As opposed to paying a flat rate over the lifespan of the loan, you only pay the difference between the money you put down and the PROJECTED value of the vehicle (including depreciation).
As we can see, it is often wise to speak with a professional to determine which option may be the most appropriate for your circumstances.
What Conditions do You Need to Meet to Qualify for a Car Loan?
The conditions will tend to vary from provider to provider and yet, there are some universal signs that most lenders look for. First, you will need to have a good credit history. Depending upon the price of the car, this credit score may be required to be quite high. Secondly, many lenders will ask for proof of employment as well as a bank statement. You may opt for a co-signer although this is not always the case. A co-signer might be required if you have a poor credit track record. Agencies such as Experian and Equifax will be contacted by the lender and a decision will be based upon the scores that they provide. Never forget that you can access this information as well; a useful preliminary step that can help to determine whether or not a car loan is financially feasible.
Where Can You Encounter Worthwhile Car Loans?
Although some may choose to speak directly with a lender or even a car dealership, it is becoming more popular to use the power of the Internet to your advantage. Many quality websites such as http://www.thesimpledollar.com will provide you with the top ten providers and a handful of the benefits that each is able to offer. Comparing these organisations will take only a matter of minutes and even if you are unable to find the exact package that you are looking for, you will be able to appreciate the processes and the overall stipulations in greater detail.
A final option is to consult with your bank, your building society or a similar financial institution. As they are quite familiar with you as a client, the chances are high that you will be approved for a loan (once again, this depends upon your credit history).
Car loans can enable you to purchase the vehicle of your dreams while not having to put a great sum of money forward as a down payment. In fact, some loans can even help to improve your credit score. Always remember the facts that were mentioned in this article, as a bit of research can go a long way. Millions of individuals from across the United States apply for such loans each and every day.
The Top Car Financing Companies
There are countless financing companies within the United States and as you can imagine, there is no such concept as “one size fits all” in reference to a loan package. Some firms are able to offer superior services and a higher degree of transparency than others. As of 2016, there are a few companies which stand out from their competitors. These are (in no particular order):
- CarsDirect
- MyAutoLoan
- U.S Bank
- LightStream
- Bank Of America
- Auto Credit Express
- Capital One
Note that all of these organisations can be found online. After you enter in your basic details, they will provide you with an estimate of your financing options as well as the interest that is required to be paid annually (known as APR).
How to Get the Lowest Rates
Car loans are some of the best ways to purchase a much-needed vehicle. Whether you are hoping to get behind the wheel of a work van or you desire to cruise the motorways in an open-top convertible, financing is normally mandatory as opposed to paying a massive lump sum. While these loans are very convenient, finding the best deal at the right time is not always easy. There are multiple providers to choose from and it seems as if each firm is boasting a completely different offer. Let's construct a “cheat sheet” that can help you obtain amenable rates as well as provide a better understanding of how these loans function.
The first step in finding an agreeable rate is to have a decent or good credit score. If your score is poor, you must expect that the rates offered will be higher (lenders will consider you to be a greater risk in regards to default). However, this is not to say that there are not other tricks to consider.
As with the purchase of any product, SHOP AROUND. Never settle on the first figure that you come across. Thanks to the power of the Internet, there is simply no excuse to fail to perform a bit of homework. Take a look at third-party portals such as MoneySuperMarket.com. These can quickly compare and contrast all of the top providers in the industry. You will need to fill out some basic details such as your age, location and the type of car you hope to purchase. Navigating to individual websites will then provide you with an even clearer picture.
Finally, there is nothing wrong with speaking directly to a dealer or a lending institution such as your bank. They can likewise provide you with real-time loan amounts and this could be a great opportunity to ask any additional questions that may arise along the way. As before, never settle for the first offer. It is wise to compare between three and five different lenders before committing to a specific contract.
The Types of Car Loans
If you are in the market for a new or used car, the chances are high that you will require some type of loan or financing packages. While it is important to address the mechanics of these packages, it is just as crucial to appreciate the top providers as well as some of the main variants that you may be able to apply for. Let's take a look at this topic in a bit more detail.
Secured Car Loans
A secured loan is a financial vehicle backed up by a tangible asset. In reference to secured car loans, the amount that you borrow is guaranteed by what is known as your equity. Equity could represent a house or even another vehicle. In the event that you fail to repay the loan on time, this equity could be seized and used as a replacement for missing funds. Secure loans have low interest rates and you can borrow a significant amount.
Private Car Loans
A private car loan is intended when you are purchasing a vehicle through a private seller (as opposed to a dealership). Lenders will approve these loans and much like secured options, interest rates can be agreeable and it is likely that you will require some form of collateral.
Student Car Loans
These car loans are associated mainly with first-time buyers who are currently enrolled in school. Although the amount that can be borrowed is generally limited to a few thousand pounds, they are excellent to help build credit and repayment periods are quite flexible. Student can loans may require a cosigner to be approved (such as a parent).
Car Loans for Bad Credit
There can be times when your credit rating is not as high as you desire. Fear not, for there are loans specifically designed for this situation. Car loans for bad credit are not only able to help you purchase a vehicle, but they are also intended to improve your credit score over time. Keep in mind that interest rates tend to be higher and the amount that you can borrow may be less than a traditional secured loan.
An Indirect or a Direct Auto Loan?
We should point out that there are two main types of auto loans. A direct loan is arguably the most traditional. In this case, you will borrow directly from a lender such as a bank, a loan company or a building society. A voucher or a blank check will normally be provided to pay the dealer.
An indirect loan involves a dealer who takes on the role of a “middleman”. This can also be referred to as “dealer financing”. There are normally a number of lenders that the dealer works with and in a best-case scenario, he or she will be able to encounter the loan that is meant to suit your unique financial needs.
Auto loans are a modern convenience that should never be overlooked. Thanks to the number of choices at your disposal, you can rest assured that the most amenable plan is literally only moments away. Keeping these metrics and generalities in mind will enable you to move forward with the process in no time at all.
Financing Your Car Online
The online community of auto financing has grown in leaps and bounds during the past decade. This is due to the fact that nearly every lender now has a website that can be accessed in a matter of seconds. Many are now boasting the ability to offer you real-time quotations in a matter of seconds. This is all well and good, but note that these figures may not represent what you will ultimately be paying.
These financing calculators should be used in conjunction with other research in order to obtain a reasonable idea of how much financing is possible. After any such figure has been obtained, always make it a point to speak with a customer service representative as opposed to moving forward with the loan immediately.
On a final note, always look for previous customer reviews and accreditations. This is another time when third-party portals will come in very handy. Never forget that any online vehicle financing company is selling a product. They may not be completely truthful in regards to interest rates (APR), monthly instalments, payment time periods and what happens if you default. The best way to determine the transparency of any firm is through the opinions of others.
