The Basics of Applying For A New Car Loan
Saving up to buy a new car isn’t easy. Most people have to take out a car loan, and that can be intimidating. This article starts with the basics and teaches you what you need to know about car loans and then delves into the nitty-gritty.
What Is a Car Loan?
A car loan is what you borrow from a bank or credit union to pay for a car. Most car loans are made specifically for the purchase of a new or used car, but some lenders may offer car loans to pay for auto repairs and maintenance. Almost always, auto loans are secured by the automobile being purchased. If you fail to make payments on your auto loan, your lender may repossess the vehicle and sell it to repay your debt.
Things to Take Into Consideration Before Getting a Car Loan
– Loan costs: Your loan costs include two main elements: principal and interest. The principal helps you pay for the cost of the vehicle, while the interest is what you will pay overtime to use your lender’s money. You’ll also want to account for the fees that you may have to pay. Some charges could be non-negotiable, like the title and tax costs, or negotiable, like delivery charges and origination fees.
– Down payment: A down payment is a percentage of the cost of your new vehicle that you have to pay when you get an auto loan. The down payment can be anywhere from 3% to 20% of the total purchase price of the car. Putting more money down will reduce how much you will need to borrow and may lower your monthly car payments, interest rate, and the total interest you will have to pay over the course of the loan term. A more significant down payment may also be required for a higher-priced, less standard vehicle such as a luxury car.
– Terms and conditions: In addition to the costs and down payment, you’ll also want to pay attention to the loan term, prepayment and resale terms, and conditions regarding repossession.