What is the Best Loan for a Car
When you are looking to buy a new car, there are typically two options to choose from. You can either buy the car by paying upfront, or you can search for alternative financing options which include loans.
If you can secure all the money needed and pay it upfront, you will save yourself from having to pay a lot on interest rates as is the case with auto loans. Sadly, not everyone has the financial muscles to do this. The good news is there are lots of lenders in the market who offer excellent auto loans at favorable terms.
These allow you to get a car and pay for it in small amounts every month for a given period. The best auto loans usually carry affordable interest rates, and they also have limited fees. Some loans don’t even come with most of these fees and penalties which is really important as it gives you a chance to pay off the loan without too much pressure.
What most people don’t know is that a lot of work needs to be done to secure these loans. There are so many auto loan lenders in the market, but not all of them come with favorable terms. To get the best loan, you need to do thorough research on your options. Fortunately, or unfortunately, your credit record will also influence the kind of loan you get. You have nothing to worry about if you have a good record, but if you have a poor FICO score, your options get a bit limited. This is simply because people with poor credit scores are associated with late or deferred payments something that every lender wants to avoid.
After all, no one is in the business of making losses. Don’t lose hope though because there is still a couple of decent auto loans for people with bad credit out there.
In this particular guide, we will be looking at the best loans for people with good credit record but before all that;
Types of Car Loans
1. Purchase Loans
These loans are issued to help you purchase either a new or used car. If your application for this loan is approved, it will be issued through banks, online entities, credit unions, or dealerships depending on who the lender is. You should also know that some of the lenders of these loans limit the models of car that they can finance. You must, therefore, check out whether the specific loan you are applying for has such a limitation and if it does; is the car you are hoping to buy among the models accepted by the lender?
2. Private Party Purchase
This is more of a personal loan that is issued to assist you in purchasing a car from an individual.
3. Lease Buyout
This loan is best suited for anyone who leased a car and wants to avoid penalties due to wear and tear, excessive mileage and other fees. The loan enables you to buy the car.
4. Loan Refinancing
This is a loan that’s taken to replace an existing auto loan. Loan refinancing is usually considered to avoid high-interest rates linked to the current loan. This financing option saves you a lot of cash since the new loan comes with much lower interest rates. It may also help to extend the loan terms thus giving you time to settle the loan fully without getting penalized.
Choosing an Auto Loan
The following tips should help you make a wise decision when looking for a car loan:
Before you even start your application, make sure that you read through the qualifications and see if you meet the set requirements. Different lenders have a different set of qualifications which determine not just whether you qualify for the loan or not but also on how much money you will get.
Of course, your credit score will play a huge role in determining your qualification and the amount most lenders will be willing to offer, but that’s not the only thing they check on. Some will also look at your income, employment history, geographical location, age, residency status among many other factors.
The good thing is most lenders have pre-qualification tools that can help you check on the possibility of your application going through. These help you to know the chances of your loan getting approved before you even make an application.
The car you want to buy will also determine whether you qualify for a particular loan or not. As explained above, some lenders tend to limit their loans to specific car models.
b. Application Process
Everyone wants a loan application process that is smooth and efficient. It shouldn’t take you endless hours to fill forms with dozens of unnecessary information. A lot of lenders have streamlined their loan application processes making them a lot easier to understand and also easy enough for everyone to do.
While talking about efficiency, most companies also do their best to respond within minutes upon making your applications. A big majority of lenders will then tell you whether you qualify for their loans and how much money they are willing to give you. Your application should then be processed and have the funds transferred into your account within a day or two.
c. Loan Option
You will also have to choose one of the loans discussed above depending on whether you want to buy a new or used car. After identifying your ideal loan, the next thing is to determine the down payment requirements of the loan, APRs, term lengths and loan amounts. These details should help you get just the right amount of cash you need from the right lender to get your car.
d. Additional Features
Lenders tend to offer loans with unique perks to entice customers. These incentives are highly welcomed but don’t let them blind you into taking a loan with high-interest rates and other fees. Stay focused throughout the process, do your calculations whenever necessary and don’t forget to read the final agreement before signing the agreement keenly.
Some of the benefits that you can look for include an option to defer payments, auto loan calculator tools, customizable payment deadlines, soft-credit inquiry and online rates which allow you to get quotations and compare the rates online before completing your application.
e. User Reviews
One of the best ways of gauging how your experience with a particular lender will be is by going through the user reviews. These will help you know everything you should expect from the timeliness of your application getting approved and the funds being transferred to billing and customer support services.
Top 3 Loans for a Car
MyAutoLoan is one of the most diversified auto lenders in the market. This platform offers different types of loans including lease buyouts and auto refinancing. They can also give you a loan to buy a car from a third party.
Since the lender has various types of loans, they will provide you with useful tools that will help you determine which loan is the best fit for you. There is even an option where you submit your desired loan amount, ZIP code, and credit score and the lender will use this information to tell you how much you will pay in interest rates. This saves you from having to take a loan that is too little or too much for your specific needs.
We also love the fact that MyAutoLoan keeps the interest rate charts of their fixed loans updated every day for you to know how much you will be expected to pay.
MyAutoLoan offers minimum auto loan amount of $8,000. You can also calculate how much you have to pay every month through the tools provided online.
LendingTree is a platform that allows you to shop for auto loans from different lenders and compare the interest rates and terms of their loans without charging you anything. The lender offers to refinance for existing car loans, financing for new or used cars and lease buyouts.
Something else about LendingTree is that they can consider your credit score and adjust your loan terms in a way that is rewarding to you. If for instance, you have an excellent credit score of above 800, the lender may give you a car loan with an APR as low as 1.85% payable within 36 months. People with lower credit scores will get the loans at a higher APR, but they’ll still be pretty decent.
LendingTree can also approve your loan before you’ve even shopped for the car. This helps you to know your budget and shop appropriately.
CarsDirect connects customers to various lenders offering different loans at different competitive terms. The company has lenders of all types who are willing to provide auto loans to almost everyone. Your bad credit record may, therefore, limit your offers but you will still get a few lenders willing to approve your application. If you have a good credit score, you will get numerous offers from a single application. You can then compare these offers and choose one with the best terms.
Customers can also shop for cars from the CarsDirect website. Additionally, CarsDirect does not have a limit on how much you can borrow!
One issue with CarsDirect is if you have a good credit record, you may have to deal with various lenders contacting you with loan offers, and this can get annoying sometimes.