Customers who want to secure a lower interest rate apply for secured loans which are safer for banks. Financial institutions advertise auto loans with affordable monthly payments, flexible repayment terms, and competitive interest rates. Check for credit insurance, prepayment penalties, and other hidden fees and charges. Banks also offer unsecured loans to borrowers with a very good or excellent credit. The terms vary depending on your credit score and type of vehicle, e.g. car, ATV, snowmobile, jet ski, etc. Your credit and payment history are taken into account. The term varies, depending on whether you apply for a new or used car loan. If your credit score is in the 500 range, your interest rate can be as high as 18 – 20 percent. Borrowers with an excellent and very good credit score (i.e. over 700) are offered competitive interest rates. Some lenders also offer bad credit auto loans, and borrowers with a history of delinquencies, late payments, and credit issues qualify. If you are a member of a credit union, you may want to visit your local branch first.
Some financial institutions offer financing for brand new vehicles only. There are also refinance options with different interest rates and repayment schedules. A down payment is usually required if you plan to finance an expensive item such as a vehicle or another asset. Borrowers who offer a larger down payment are offered attractive deals. Whether you choose a short- or long-term loan depends on your income level, financial goals, and other factors. Depending on your status, you may need to submit documents such as profit and loss from business and tax returns. Make sure you bring the required supporting documentation with you. Financial institutions that offer unsecured loans have more stringent criteria.
You can apply at a local branch, by phone, or online and will get an initial credit decision shortly. The application process may take several weeks. There are different online tools that calculate the monthly payment and help customers to make a decision. They calculate your payment based on your down payment, car price, APR, etc. Customers also benefit from insurance and tax estimates. If your loan amount is $10,000 at an interest rate of 8 percent, and the term is 48 months, the monthly payment will be $244.13.