EchoBay Expert: I've never applied for an auto loan so I don't know what to expect during the process. What are the basics I need to know about getting a car loan?
Loyal Reader: The first thing you'll discover are there are a variety of lenders for you to choose from. Whether you want to work with a local bank, a credit union, an online lender or the dealership you're buying a car from will be the first decision you'll need to make. Generally, as a rule, online lenders tend to have the best available interest rates and the quickest approval times.
Exactly what interest rate you'll be charged will be determined by what shape your credit is in. If you have great credit, you can expect a low interest rate. If your credit has some scars, you'll probably wind up paying a bit more for your auto loan. If you're thinking of seeing a dealer about a zero-interest financing offer, make sure that you understand not all borrowers qualify for this type of financing, and your credit will have to be absolutely spotless in order to qualify.
Unless arranging your financing online, be prepared to put money down on the vehicle. The down payment required will vary, but consumers usually put at least 5 percent down when making a vehicle purchase. The length of your car loan will depend on how long you want to be in debt and how much money you can afford to pay each month.
Vehicle terms generally range from 36 to 72 months (although shorter and longer terms are available). Try sticking with a 36-month auto loan term in order to pay off your vehicle quickly. This will also help you to avoid becoming "upside-down" on your auto loan, where you owe more on the car than what you can sell it for.