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1. What do I need to determine if I qualify for auto financing? | |||||||||||||||||||||||||||||||||
Usually all you need is:
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2. If I don’t have any credit, can I still qualify for a loan? |
| Yes. Many lenders finance first-time buyers. | |
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3. What interest rate will be charged on my auto loan? |
| The interest rate you qualify for will be based on your credit history, whether you're buying new or used, and the length of the loan. Click here to get a free credit report. | |
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4. What is the length of an auto loan? |
| Auto loans usually have terms of 36, 48, 60, or 72 months. Shorter loans may have lower rates and are cheaper, but have larger monthly payments than longer-term loans. | |
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5. What is a simple interest loan? |
| Interest is paid only on the original principal, not on the interest accrued. These loans require only the payment of interest on the principal balance up to the point the loan is payed off. While these loans may be used in a variety of loan applications depending upon the lender’s policy, generally, simple interest loans are found where the loan amount is in excess of $25,000 and/or the term exceeds 60 months. | |
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6. What is direct financing? |
| This is when you obtain financing straight from a bank or other lending agency. | |
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7. What is indirect financing? |
| Indirect financing is financing from a dealership. The dealership typically makes a mark-up on the interest rate. | |
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8. What are prepayment fees? |
| Prepayment fees are charged by a lender for paying off your loan balance early. Only some lenders and dealerships will charge them, and they are not common in auto loans. | |
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9. Do I need insurance to get an auto loan? |
| Yes. Virtually all auto loans are secured by the vehicle itself. If the vehicle is lost or damaged, the lender’s security (the ability to sell the vehicle to recover the loan amount) is also lost. Therefore the lender will want to protect its security interest in the vehicle by requiring the borrower to place a policy of insurance that provides not only liability coverage, but also collision and comprehensive. The minimum amount of coverage required will generally be determined by the lender’s loan policy and can vary from lender to lender. | |
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10. Do I have to use the full amount of the loan for my auto? |
| Yes. Most lenders will loan only what they can secure by the vehicle itself. Usually, any accessories being added to the vehicle that increase its value will also be financed at the same time as the purchase. Generally speaking, traditional auto lenders will not finance amounts in excess of the value of the car or for a use outside of the purchase of the vehicle (including accessories) . This is different than a personal loan collateralized by a vehicle you already own free of any preexisting lien. When a vehicle is being used as collateral for a personal loan, you can generally use any amount between the minimum and maximum approved for whatever purpose you choose. If you need more than the maximum approved, you can possibly reapply for a higher amount with your lender. | |
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11. How long do I have to use the loan after it is approved? |
| This will vary depending upon the lender. Your rate will generally be locked in for up to 45 days. | |
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12. What determines the interest rate for my auto loan? |
| Interest rates are determined by several factors, including credit history, down payment amount, and credit risk, in addition to general banking industry factors such as the amount of interest the bank is charged to use the money being loaned to you. | |
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13. How long does the loan application process take? |
| Once you find a lender, the approval process is usually within several minutes to a few hours. Additional delays may be experienced for incomplete applications or if additional information is required of you before a final decision can be made. | |
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14. Will it help if I have a co-signer on the auto loan? |
| Yes. A co-signer with good credit will definitely improve your chances of getting a loan if you do not have good, established credit. | |
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15. Can I use my trade-in as a down payment? |
| Yes, you can. If there is a lien on the trade-in vehicle from a previous loan, that loan will have to be paid off before clear title can be passed on to the dealer you are trading your vehicle into. If you owe more for your old loan than your trade-in vehicle is worth to the used car dealer (referred to as “negative equity” or being “upside down”), you may be required to pay these additional costs in your down payment or by increasing your new loan amount to cover this added expense. However, not all lenders will finance negative equity in the new car loan however. Click here to get your free, no obligation automobile financing quote. | |
