Last updated on August, 1
🏆 Best Car Loans for August 2021
If you need a car and you don't have enough money for a down payment, a car loan can help you get the vehicle you want. A car loan is a financing program that allows an individual to purchase a car with monthly payments. Learn more about car loan applications today!
What is a car loan?
Worried about the time it’ll take to save up for a car? Investing in a vehicle isn’t an easy decision. It’s probably going to be one of the most significant financial commitments you’ll have in your life. Good thing, there is a car loan.
A car loan is a money you can borrow from a lender to purchase a car. Car loan services allow you to easily apply for a car loan with a dealership according to your desired amount, interest rate, and even payment time frame. With Car loans, you can get a car without spending all your life savings immediately on a single purchase.
Why do we need car loan?
A car loan will not only help you buy a car that costs more than you can afford, but it’ll also help you budget as you can adjust your costs through monthly payments. Taking out a car loan has so many benefits, such as assisting in your daily transportation needs and aiding you in your financial management. Here are the top perks in getting your own car loan:
Expedites the Car-Buying Process
Get a car now, pay for it later! Buying a car and paying for it in one transaction would probably take a long time before you can save up the whole amount. The main advantage of a car loan is that it gives you immediate access to a vehicle that you wouldn’t be able to afford instantly. That can be extremely valuable if you need your car for work or family commitments.
Lightens Financial Burden
Applying for a car loan will help ease up your car’s financial burdens since you’ll only be paying a small portion of the total car price monthly. The total cost of the vehicle will be evenly spread out and divided across the years, which in turn makes it easier for you to budget your finances for your car.
Customize Your Search
When taking out a car loan online, you can ignore all the unnecessary offers you don’t want to see. After submitting all the requirements for applying, it runs through a quick analysis and evaluation process that matches your budget and specific needs with the best deals. You won’t have to worry about reading and going through offers that don’t fit your financial situation.
When reaching an agreement on your car loan, you’re the one who gets to decide how much you will pay each month. You won’t be tempted to overspend or make budget adjustments in other aspects of your life because you already know how much you need to set aside for your car loan.
Stay Updated on Car Loan Deals
From offers on new car loans to relevant information, online car lending sites make sure to keep in touch with you and keep you updated directly through email. Most of these websites even provide you with articles and blogs about car loans. They’re full of negotiation tips to help you make the best decisions for your car loan deal.
Doing easy and fast car loan transactions from the comfort of your home isn’t the only great thing about looking for a car loan online. Applying online saves you time and simplifies the whole process, too. You can apply, choose a lender, pick a deal, and get approved all within the same day!
Get the Best Deals
Online car loan websites offer tons of features that make getting the best deal a whole lot easier. Online car loans allow you to easily choose and compare through a broader range of products and services. The online customer service team can even help in arranging finances with you to make sure everything is precisely the way you want it.
Great for Credit History
You won’t have to worry about your low credit score, and you can still get a car loan since there are tons of companies that offer the best bad credit car loans. One advantage of having to pay your mortgage every month is that it helps you to get a good credit history—as long as you stay on top of your payment deadlines.
No Collateral Needed
There’s no need to present any collateral when applying for a car loan since the car you’re loaning will technically serve as a security measure for the bank. So it’s vital to make sure that you pay your monthly dues because the bank has the right to repossess your car if you don’t pay on time.
No More Constant Repairs
Although it’s more tempting to purchase a used vehicle than to take out a loan on a new car, it isn’t always going to be the most cost-effective option in the long run. Used cars tend to break down more often; they sometimes even require repairs that could poke a hole in your wallet. With the best new car loan rates, knowing that you’re getting a new car will give you peace of mind that you won’t have to pay for repairs for a long time.
Core features of car loans
There are tons of factors that come into play when trying to pick the best car loan lender. With all the different features of car loans, you’ll be able to inquire and compare all the different great interest rates, benefits, and terms to help find a deal that’s perfect for you.
Fixed Interest Rate
You won’t have to worry about increasing bills or wondering how much you’ll need to put aside every month. One of the best things about car loans is you know exactly how much you’ll be paying every month. You’ll find it easier to budget things since your repayment interest rate is locked in.
Flexible Payment Terms
They will always give you great options on how long you want to repay your loan. Some unsecured loan terms can range from one to seven years, while secured loans can even reach up to 15 years. You can easily budget your monthly finances and choose the repayment plan that fits your financial state with these options.
Companies will give you different types of interest options that would best suit your financial needs. You could either choose a simple interest or precomputed interest. Simple interest is based on your outstanding loan amount. If you pay off your loan ahead of time, you’ll get to pay less overall. For precomputed interest, your interest is divided equally across your monthly repayments.
Some companies let you withdraw some of your monthly payments once you’ve paid off a certain percentage of your loan. This can come in handy when an unexpected bill shows up or when you encounter an unfortunate health issue.
The documentation needed to file for an auto loan is anything but simple. The manufacturer or bank would usually just check your repaying ability through proof of billing or your credit score to ensure your steady income. They also require documentation for identification purposes.
Advance Payment System
Some companies and banks will allow you to make advanced or additional repayments on your loan. This option is great if you want to pay your loan off earlier and become debt-free quicker than you planned.
Car Loan Calculator
Looking to get an idea of how much your loan will be? With the help of car loan calculators, you’ll be able to get an estimate of your car payments before visiting the dealership. With car loan calculators, you can find the lowest rates available, compare prices, and look for a car dealership that best fits your monthly payment budget.
You can customize your calculations by choosing the type of car you’re interested in, how much you’re looking to borrow, and even its interest rate.
Car Insurance Rates Comparison
Curious about how much you can save with insurance? With online car loan provider sites, you can see how much you can save by comparing car insurance rates. You can check different car insurance quotes, providers, and offered discounts. All you need to do is place your zip code and then get price quotes from the top insurance providers in your area.
Most online car loan sites offer a resource center that helps you learn more about your credit, debt, and vehicles. Here you can find out your credit score, learn how to improve your credit reports, choose the right credit card for your loan, and even learn what type of loan suits your financial situation. These resource centers can help you learn how to manage finances before taking out a loan and how to take control of your credit future.
When getting a car loan, there’s a huge chance that they’ll throw in additional perks and freebies. They could give you bonuses like free road tax for a year, a free whole vehicle inspection, and sometimes even free gas.
Types of car loans
Car loans come in many shapes and sizes according to the lender, the needs of the borrower, and the car itself. Car loans have different structures and processes, that’s why it’s essential to know your options so you can choose the best car loan rates suited for your needs.
Secured Car Loans
This loan allows you to pledge the car you're loaning as the collateral itself. This type of loan helps guarantee the lenders that the loan would be paid back in full. If you fail to pay the right amount at the right time, the lenders have all the right to take your car back.
Pro #1: They’re less risky for the lenders, so you won’t have to worry about strict high-income requirements when applying for the loan.
Pro #2: Lower interest rates compared to unsecured auto loans.
Pro #3: Once your loan is paid off, the lien is lifted, and your lender no longer has the right to repossess your vehicle.
Pro #4: The car itself acts as your collateral, so you can borrow larger amounts from lenders since this serves as an assurance that you’ll pay back the loan.
Con #1: If you fail to pay on time, the lender has the legal right to repossess your vehicle.
Con #2: These require using your home or other forms of property as collateral.
Con #3: An auto loan can stretch for years, depending on the agreement. You might end up still paying monthly for your vehicle even after your car has broken down.
Unsecured Car Loans
An unsecured car loan is a loan that doesn’t need any collateral. The approval of your loan is solely based on your credit history, financial records, and equity payment capabilities. Since there is no collateral, even if there are times that you can’t pay your dues on time, the lender won’t repossess your car.
Pro #1: Nothing will be taken away from you even if you’re not able to pay your dues on time.
Pro #2: They have quick approval processes that won’t take any longer than applying for a secured loan.
Pro #3: If you have a high credit score, some companies and banks may offer you additional options, such as 100% financing.
Pro #4: They have flexible terms. You can minimize your monthly dues to an extended loan term or pay the loan back quickly for minimum interest rates.
Con #1: Since the lender will be at a higher risk, unsecured loans are harder to get than secured loans.
Con #2: You’ll need to have a high credit score to give the lender more assurance that you can pay them back.
Con #3: These have high interest rates. This serves as the security blanket for the lenders if payments aren’t made.
Con #4: When you don’t pay on time, it can become a financial burden on you as a borrower. Interest grows over time, which could increase your debt.
Con #5: If lenders get tired of nonpayments, they can drag you to court to get some of your assets, like your car or house.
Car Title Loans
A car title loan is a short-term loan where you put your car title up as the collateral in the deal. Your car title will return to you once you fully pay off the loan.
Pro #1: The focus is on your vehicle’s value and not your credit score. Since your title acts as collateral, companies won’t make your credit score the defining factor in the approval of your loan.
Pro #2: The process for applying for a title loan is simple and straightforward. There are company sites and bank managers you can contact through the phone. You can complete the whole process in the comfort of your own home.
Pro #3: In some cases, you’ll get the payout the same day. You may even access the money on the same day.
Con #1: You need to own your car or have equity in it.
Con #2: In some cases, lenders will charge you around 25% of the loan amount per month.
Con #3: f you can’t pay the loan on time, lenders could either ask you to roll over the loan into a new one. This could result in additional fees or car repossessions.
Car Loan Refinancing
Car loan refinancing can help you pay off your existing car loan and replace it with a new one. With the help of refinancing, you could find lower interest rates or reduce your monthly payments by adjusting the length of your term. This could help you use your money for other financial responsibilities.
Pro #1: They can help you get a better deal, or get another loan with a lower interest rate.
Pro #2: Some companies offer online applications, which will make the loaning process way easier than usual.
Con #1: This usually requires that your car is less than ten years old or newer with under 120,000 miles.
Con #2: Must have a certain amount of outstanding balance from the first loan.
Con #3: The bank or company will only offer you this based on your credit standing. If you were always late on payments, you might not get approved.
Peer to Peer Car Loan
P2P car loans enable investors to lend money directly to the borrower. P2P car finance works by matching lenders to borrowers. You’ll be able to borrow the cash you need to buy your car right away and then pay back your private benefactor over time. The loan interest depends on the agreement.
Pro #1: These are unsecured, so your car can’t be repossessed by the lender.
Pro #2: There are non-prepayment penalties. You can pay off your loan as early as you want to.
Pro #3: Both parties can decide on the agreement without profiting middle-men.
Con #1: Lenders will usually prefer those with high credit scores.
Con #2: If you have bad credit, be prepared to be offered very high interest rates.
Con #3: Your credit card score is at risk if you don’t pay on time.
Car Dealership Financing
Most car dealerships can offer you financing for their car deals. After picking out the car you want to buy, the dealer will have you fill out a credit application form, which they will submit to different lenders. Their offers will then allow you to compare the best car loan rates for you.
Pro #1: Sometimes these dealers will offer you the best interest rates on car loans. These are usually much lower than bank offerings.
Pro #2: If you present a pre-approved car loan from a bank, it’ll be easier for you to bargain with the car dealership.
Pro #3: Flexibility in payment terms.
Con #1: Dealers will sometimes mark-up the price of the cars to make up for the lower interest rates.
Commercial Auto Loan
This loan is used by businesses to buy vehicles needed for work-related trips. If your business needs a car to get around, but you’re on a tight budget, you can get a car loan to help you out.
Pro #1: Since there is a monthly set fee, you can focus more on investing your money in your business.
Pro #2: You can turn in the vehicle and switch it with a newer or different model.
Pro #3: Most leases don’t require a down payment, only the first month’s payment, and a security deposit.
Con #1: You’ll need to do a lot of paperwork—not only personal records but also business documentation.
Con #2: New operators usually have a difficult time getting approved for a loan because of revenue history and lack of credit.
Con #3: Some companies require a minimum amount of vehicles to loan out.
Con #4: There’s a mileage limit, and businesses have to pay more for additional miles compared to non-business-related loans.
Lease Buyout Loan
Have you fallen in love with the car you’ve been leasing for the past few years? You can make it yours with lease buyout loans. These types of loans allow you to buy the leased car at an estimated residual value.
Pro #1: Since you’ve already been making payments for your lease, you won’t have to place a down payment on the vehicle.
Con #1: The leased car might exceed the mileage limit, and this means that you have to pay excess mileage charges.
Con #2: The wear and tear of your leased car.
Who needs car loans?
With tons of school-related expenses a student has, saving up for a car can be difficult. As a student, you’ll definitely need transportation to classes, your job, internships, and even parties. With car loans, you’ll be able to drive home with a car by just paying a down payment or having a co-signer.
Some companies and banks specifically cater to car loans for veterans and military families. Although there is no such thing as a “veteran auto loan,” tons of dealers offer special discounts and rebate on the best car loans for veterans.
Safety is always the number one priority when on the road, and you need a car that you can trust. Instead of spending your family savings on poor-quality vehicles, you can choose the best rates on car loans with affordable monthly payments. You and your family will feel more confident and secure in a reliable car.
For many companies, vehicles are crucial parts of their operations. These could help in work-related tasks like delivering products to customers and transporting files and employees. However, tons of companies don’t have the capital to purchase a vehicle right away. Since car loans offer a wide variety of cars, your business doesn’t have to worry about transportation anymore.
For those who are on official business all the time, it’s important to always be on the go. This means that you need a convenient mode of transportation that’s as ready as you are. Auto loans are a way to purchase a car right away. This could help make your job easier without burning a hole through your pockets.
Step-by-step guide in applying for car loan from the bank
Step 1: Check your qualifications.
Before applying for any loan, the most important thing to do is to be a responsible borrower. You need to meet all the bank’s requirements.
Eligibility Requirements: Age, citizenship, monthly household income, employment status.
Good Credit Score: Banks will use your credit score to evaluate your ability to pay back your loan, and to determine your payment plan. The higher your credit score is, the higher your chances of getting a car loan with low-interest rates. It’ll be hugely beneficial for you if you check your credit score first to settle corrections.
Auto Loan Pre-Qualification: These pre-qualification tests from the bank will let you and your bank know if you’re financially ready to apply for a car loan. This also includes the total car loan amount you can borrow.
Step 2: Compute how much you can borrow.
Ask yourself how much you’re willing to pay every month for the car loan. Tons of banks have loan calculators that you can use to help estimate this. Make sure to take into consideration these factors that will affect your car loan costs:
Vehicle Type: Are you planning on loaning a new car, or are you looking into the best-used car loans? What model are you eyeing? It’s always best to base your choices on what is within your monthly budget.
Down Payment: Banks will usually charge a down payment of 20% to 50% of the car’s selling price. Eventually, your chosen down payment plan will affect your monthly bill. Consider paying a higher down payment to get a lower monthly interest.
Length of the Loan: Most of the banks give you options ranging from one to six years. If possible, it’s best to choose the shorter-term so you’ll be paying less interest over time.
Step 3: Compare car loans.
Do your research on who has the best rates for car loans and find the best deal for your budget. You can compare who has the best interest rates for car loans, loan amounts, down payment needed, and the repayment terms that they have to offer.
If you’re too busy to study your car loan options or not quite sure how to, you can use car loan sites. In a few clicks, you’ll find a loan that suits your specific needs and budget. These sites are usually free, and you can use them anytime and anywhere.
Step 4: Complete the car loan requirements.
Prepare all supporting documents to prove your identity and your income. These will usually include government-issued IDs, certificates of employment, and payslips or income tax returns.
Step 5: Submit your car loan application.
Most banks that offer car loans accept both walk-in and online applications. You can compile your documents and submit them to any bank branch. For convenience, best online car loan applications can be submitted online by scanning or taking photos of your documents and IDs and sending them to a bank manager.
Step 6: Wait for your car loan approval.
Banks usually process the loans within a week. Once your car loan is approved, the bank will require you to sign your loan documents, submit any additional requirements, pay the down payment and other loan-related fees, and get a comprehensive car insurance policy.
Step 7: Get your car.
Before the release of your new car loan, you’ll receive an introductory letter—this will tell you where to send your payments monthly and your payment due dates. After all these post-approval steps, all that’s left to do is drive your new baby home!
Frequently Asked Questions (FAQs)
First, choose your preferred car, down payment, and repayment terms. The results will show you the loan amount, down payment, and monthly amortization. By changing the information you’ve placed in the calculator, you can re-compute to see how the amounts will vary. You can use this to find the best loan plan suited for you and your budget.
Unfortunately, if you have bad credit, it may be tougher for you to get a car loan. The good news is that lenders are willing to help you despite your low credit score. You can negotiate your way to a great car loan deal.
If you don’t find the best rates for used car loans, you could be overpaying thousands of dollars. Whether you’re buying a better model, or refinancing an existing loan, it's essential to find the best terms possible when it comes to the rates and benefits so that you won’t be wasting your time and money.
One of the best ways to determine the best interest rate for car loans is by comparing the prices lenders offer you. This is called “rate shopping.” This is highly encouraged since borrowers can use pre-approved offers as leverage at the dealership. While this prep work can help you estimate the rate, only lenders can tell you the exact interest rate.
The best car title loan lenders will lend you up to a maximum amount of 50%. This is based on the loan value of your vehicle and its pricing guide.
All banks are the best banks for car loans. Each car loan provider does its best to offer a variety of different features and promos to cater to your needs and preferences. This is why comparing deals provided to you is important—you’ll be able to choose which bank deal best suits your needs.
Dealers tend to mark up interest rates. If you’re offered a lower price even with the markup, you should go with the dealer financing. However, applying for a loan directly from a lender might help you get a better rate.
Some people prefer to join a credit union to get the best possible financing on a car. Using a credit union can help you save tons of money on your next car purchase. They usually offer much lower interest rates compared to banks and finance companies.
The sad part is some lenders can opt to charge you a prepayment penalty if you pay early or make advance payments. Other lenders use a precomputed interest format, so you'll pay more in interest in the first part of the loan term.
Paying off a car loan can make a significant impact on your credit score, this can even raise it to 35%! Taking out a car loan causes a positive effect on your credit as long as you pay your monthly payments on time and at its full amount.