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What to Expect When Financing a Used Car
If you’re the type of person who doesn’t care that their limousine had been driven by someone else, or you just lack the funds for a new car than maybe taking a used car loan is the way to go. The thing that’s most important here is to know your limits and your credit score. A lower FICO score will definitely result in a higher APR on your loan. Also, if you have a more money left over at the end of the month you’ll be able to get a better loan.
The APR on auto loans depends heavily on your credit score. Someone with a credit score of 720 or higher would usually get an APR of 3.25%, while someone with less then 600 can hope for 13%. This is a huge factor in determining whether or not you can even afford a certain car loan. There are a lot of available credit score checker tools online that can help you approximate the rate of interest you should be getting from dealers.
It’s also no secret that a shorter-term loan is , in total, much cheaper than a long term one. For a loan of $20,000 with an APR of 5% the total interest paid is 2 times larger over 6 years than over 3 years. The monthly payment might be larger when going for a shorter-term loan, but it really odes pay off in the long run. The online Bankrate calculator can help you find the golden zone between short-term and low-monthly-payment loans that fits your financial situation.
Be careful around car dealers. They will most definitely offer you some extras along with your auto-loan such as car insurance or credit insurance. Usually the best thing to do is to decline these offers. Consider paying sales taxes, registration fees and other expenses separately and reading the contract thoroughly before signing it.
I’ll quickly overview some well-known online auto loan providers just to give some insight.
CarsDirect. They’re mostly known as a car-buying service, but they also offer auto loans. All of the calculators to help you decide on your loan are on their website and they’re pretty transparent. Consider CarsDirect if you’re looking for a smaller loan. They also have great refinancing programs and dozens of articles about car buying tactics.
MyAutoLoan. MyAutoLoan is a service that connects you to a third-party lenders of all major loan types and include a great interest rate calculator on their website. They have extensive FAQs and are a great option for someone who’s a first-time buyer and hasn’t yet got to know the ropes. You will definitely have to talk to multiple lenders before striking a good deal, though.
The U.S. Bank and Bank of America are also great choices for your car-loans if you’re looking for the security in working with a large bank and in person. Some of the rates you can find there are ridiculous at under 2%, and maybe even lower if you have a pristine credit score.