Compare Best Auto Loans, Rates and Lenders

by -0 Views

7 types of auto loans

New car purchase loans enable you to borrow money to buy a new car and pay it off over time. Lenders typically define a new car as one that has never been titled and is the current or previous model year.

Used or pre-owned cars are older than the previous model year. Loans for used cars may come with certain restrictions, such as maximum mileage or vehicle age. These loans can help you pay for a used car you buy from a dealer, from an online car retailer or from a private party.

Auto refinancing loans enable you to replace your current auto loan with a new one from another lender. You may want to refinance if you think you could now qualify for a lower interest rate. Refinancing a car loan can be a way to lower your car payment or pay off your loan sooner, saving you money on the total interest you pay.

Just answer a few questions to get personalized results from our lending partners.

Cash-out auto refinance loans work like regular refinancing, except you can borrow extra money against the equity in your car and roll that amount into the refinance loan.

Lease buyout loans finance the purchase of your leased vehicle, so you can keep it or sell it to profit from any equity you have in the car.

First-time car buyer loans can be challenging to get when you have no previous car loan or credit history. But some lenders have more flexible credit requirements to help first-time car buyers qualify, although it’s often with a higher interest rate.

What to know before you apply for an auto loan

Regardless of the type of auto loan you apply for, here is some basic information that can help you through the process.

Interest rate or APR: Your loan’s interest rate, also called annual percentage rate or APR, is the amount you agree to pay each year to borrow money, on top of the cost of the car. It includes any lender fees and is expressed as a percentage. APRs vary, but you can use the table below to estimate the interest rate you might expect for your credit score on a new or used auto loan.

Your credit score is only one factor that goes into determining your APR. Lenders also consider other criteria, such as income, the loan term and the type of vehicle you’re buying.

Source: Experian Information Solutions.

Credit scores fall within a range of 300 to 850 on two basic scoring models, FICO and VantageScore. Some auto lenders use industry-specific scoring on top of the basic FICO model when making auto loan decisions, so the rate and whether you’re approved can depend on which scoring model an auto lender uses. You can get your credit report with credit score for free through NerdWallet or from

Auto loan preapproval usually requires you to provide more personal information, such as a Social Security number. It’s a conditional approval of credit, pending verification of your information, and typically carries more weight than pre-qualification. If you’re buying from a dealership, presenting a preapproved loan offer from another lender gives the dealership a rate to beat.

Neither pre-qualification nor preapproval guarantees loan approval, and the loan rate and terms can change later in the loan process. A hard credit inquiry, which temporarily lowers your credit scores, will be done before a loan is finalized.

Auto loan term: The term is the amount of time you have to repay a loan. The most common auto loan terms are 24, 36, 48, 60, 72 and 84 months. NerdWallet recommends avoiding long car loan terms if possible, limiting new cars to 60 months and used cars to 36.

Going with a longer term loan may result in a lower monthly payment, but you will pay more in interest over the life of the loan. Also, because cars depreciate, you could end up owing more than a car is worth, which is called being “underwater” or “upside down” on a car loan.

Compare auto loans from multiple lenders

Lenders vary when it comes to the criteria they use for approving auto loans and setting rates, so you may benefit from applying to several.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

No More Posts Available.

No more pages to load.