How to Get a Car Loan

Introduction

* Unless you are independently wealthy or have been scrimping and saving for the past several years, you will probably need to take out an auto loan to finance your car. Most dealerships provide financing, but they don't always provide the best possible deal on financing.
* It is best to secure financing from your bank or an online lender. If the dealership from which you buy your car can match or better your bank's terms or offers a rebate as part of their financing package, you might then consider using the dealership as your lender.
* The information presented in this guide will walk you through securing the best financing package for your new car or vehicle.

The Parts of a Loan

# If you can't afford to pay for an expensive item like a car, home or college education in full, you can apply for a loan. A loan is exactly what it sounds like—a financial institution or individual lends you the money to pay for an item or service with the expectation that they will be paid back in full plus interest. Lenders naturally prefer to lend money to borrowers who have a history of handling their finances responsibly.
# Loans are made up of a few different components:

Term

* The term of the loan is its length. Will you be paying back the bank, dealer or your parents over 36 months, 48 months or longer? Remember that the longer it takes for you to pay back the loan, the more you will pay in interest.
* BankRate.com advises that you "run like the plague" from lenders offering 72-84 month car loans and aim for a loan term of five years or less—preferably less.

Interest Rate


* The interest rate is the percentage of the loan you're charged for borrowing the money in the first place. Your interest rate will, in part, be determined by your credit history.
* The APR (Annual Percentage Rate) is the best rate to use when comparing lenders. The APR is a way of expressing the "finance charge" you owe on a yearly basis; the "finance charge" includes both the interest and any fees you owe for the arrangement of the loan.

Down Payment

* Your down payment is what you can afford to pay today. The larger the down payment you can make, the smaller the loan you have to take out. That large down payment may even secure you a more favorable interest rate.
* While there are many financing deals for cars that don't require a down payment, it is in your best interest to pay for as much of the car as you can up-front. BankRate.com recommends paying at least 20% of the car's purchase price as a down payment.

Example

* Here's an example of how the math on your auto loan is done:
* If you take out a $15,000 auto loan from your credit union with a 7.5% APR to be repaid over four years, you will owe $362.69 every month. Over a year, those payments would total $4,352,28. Over the life of the loan, you'll end up paying $17,409.12. That's $2,409.12 in interest over the life of the loan.
* Don't want to do the math yourself? Check out The Motley Fool's Monthly Payment calculator.

Refinance a Car Loan: Things To Know

If you need to consolidate debt or free up some extra money each month, you need to know how to refinance a car loan. Essentially, this process involves the trading in of one loan for another, usually for a more favorable interest rate. By doing this you will lower the monthly payment you make on your car loan and you will save money in the long run in interest charges. There are some things to know about car refinance that will help you make a more informed decision about this valuable service. It may or may not be for you, but you owe it to yourself regardless. Keep in mind:

Car refinance can work for either new or used cars, but if the car is used, it has to be less than five years old. Other conditions that may apply have to do with your current loan. You have to owe at least $7,500 and not be upside down on the loan. Being upside down means you owe more on the car than it is worth. There may also be mileage limitations on the car to be eligible for refinancing.

Auto loans become troublesome because of high interest rates. When you first purchased your car, you may have received a high interest rate, perhaps because you were a first time buyer or because your credit rating was not very good. This high interest rate translates into a high monthly payment, and that increases the amount of interest you will pay over the life of the loan. By refinancing, you pay off the first loan with a second loan that has a lower interest rate, sometimes drastically lower. Not only does this reduce your monthly payment, but it can save you hundreds if not thousands of dollars over the long haul.

When you are wondering how to refinance, reading this already puts you half way there. Search for car refinance online and you will find any number of lenders willing to process your car refinance loan application. One of the benefits of applying online is that you receive several quotes from third party refinance specialists. Unlike banks or credit unions who give you their quote only, a third party lender will offer several to choose from, giving you the ability to pick the best one for your situation. In addition, there are no obligations to continue once you receive these quotes. If you decide the time is not right, you do not have to commit.

There are several things to know when you refinance a car loan. It can be a confusing process mainly because of the many unfamiliar terms. It behooves you, however, to familiarize yourself with them and to carefully read through every term and condition that comes with your refinance package so you are not taken by surprise. If you do that, you will find that car refinance has much to offer by way of savings, both monthly and long term. You can consolidate debt by taking out a refinance loan with a lower interest rate. Even if your credit rating is not the best, car refinance is still within your reach. In fact, it may even help to improve your credit, saving you money at the same time.

What Is Car Loan Refinance?

Car loan refinance is essentially trading in one car loan for another with a more favorable interest rate. When you finance a car, you are taking out a loan to pay off the amount not covered by your down payment. This is usually all of the car's price. Depending on many factors including credit score, down payment and other pertinent financial information, you'll receive an interest rate on the loan you take out, which is a percentage of the loan calculated annually. It is also known as the APR or annual percentage rate. This rate itself is broken down into even tinier fractions and accrues on a daily basis. Interest rates are some of the least understood elements of finance, and probably for good reason, because they are a source of profits for whoever is lending you the money.

Car loan refinance can help mitigate some of the monthly cost by getting you a new loan with a lower interest rate, saving you money over time. A car loan calculator will tell you how much interest you will pay over the life of your loan. With this information, you will get a better idea of the money that is tacked on to the price that is advertised. Interest is how lenders make their money, but refinancing lenders can ease the pressure somewhat by lowering the rate.

Take an example: Say you buy a car for $15,000 with zero down. So you have to borrow the entire amount. Maybe your credit rating is not great, so you receive a 12% APR over 60 months. Based on this, your monthly payment will be $334 and you will pay over $5,000 in interest over the 5 years. Thus, the real price of the car is over $20,000.

By refinancing, you can alleviate this to a certain degree. By paying your monthly payments regularly and on time, even with bad credit, it will improve over time. Say that you have paid off the loan down to $10,000. You decide to refinance, and after the application is approved, you receive a new rate of 7% for 60 months. Your new monthly payment will be $198, and the amount of interest paid over the life will be less than $2,000. Of course, you can refinance for a shorter amount of time, paying more per month but less interest. There are many combinations that can work for car refinance. You have to find what is right for you.

Refinancing your car loan is a great way to save money each month and consolidate some of your debt. All parties are left happy because your original lender gets paid off, your new lender is earning a little interest from your loan, and you are paying less each month. Car refinance is a win-win-win situation. If the time is right and you meet the conditions, it is never too late to apply.

What is Car Loan?

Find the Car Loan That is Right for You

A car loan continues to be the most popular way to finance vehicles. With a car loan, buyers normally make a down payment and then monthly payments thereafter. After people complete the payments on a car loan, they own their vehicles free–and–clear, unlike leases.

You have to make several decisions when considering your options on car loans. The first is how much you can afford. The monthly payments should fit comfortably within your budget. Be sure to account for any increase or decrease in car insurance costs associated with your new car. You also have to figure out how much of a down payment you’d like to put down. The amount of your monthly payment on car loans can be decreased with a higher down payment. Remember there are traditional car loans as well as unsecured car loans.

Also figuring into car loan payments is the interest charged on the sum you borrow. The interest on car loans will vary depending on your credit and whether any specials are offered by the manufacturer. You can use a CarsDirect car loan calculator to determine how changing a factor can affect your payments.

It is beneficial to review your credit report before taking out a new car loan. This will give you the opportunity to remove any incorrect information, which could unfairly lower your credit score and ultimately make it difficult to secure a new car loan. You can order a copy of your credit report, and sign up for credit management products through our partner, Experian. You can check out your credit report for free at AnnualCreditReport.com. The data on the site comes from all three national credit reporting agencies. Taking precautionary measures, such as checking your credit report, will make it more likely that you'll get a new car loan.

Bad Credit Car Loans
• If you have bad credit like more than 30% of Americans than we recommend you follow a few simple steps outlined on our bad credit car loan section before applying.

• When applying for bad credit car loans it is important to avoid unscrupulous car title loans. Many people lose their cars because of unfair terms.

Online Car Loans
People are turning more and more to the Internet to get an online car loan because of the several advantages it provides. You can get multiple offers from multiple companies with a minimal amount of paperwork. This allows you to find a loan that best fits your needs. Best of all, you can get an online car loan from the comfort of your home.

CarsDirect Financing Services
When you buy a vehicle through CarsDirect, you not only get a great price and superior customer service, but the opportunity for excellent terms on a car loan. A Vehicle Specialist will help you compare offers on a car loan from leading financial institutions and manufacturers. The service is quick, free of charge, and no obligation is required. In many cases, we can arrange financing in a matter of minutes. Start the process of financing through CarsDirect by going to our new car prices webpage.