Discovering the best auto loan rates nowadays has become a lot accessible because of the internet. Through the use of different website tools, you can easily compare auto loan interest rates available in your area. On the other hand, applying for an auto loan is not as simple as it seems because of the requirements asked by the bank or any loan institutions.
Auto loan rates are dependant upon a number of factors like ones credit status and history and the type of loan you need. The kind of car you own is also another factor. Car loan rates are dependant on your kind of car if used of brand new. For used cars the rates are much higher compared to new cars. If you have a used car you will have to look hard to find lenders who offer auto loans for such cars.
Banks are actually more prejudice when it comes to the type of car the borrower owns. Some banks would actually prefer brand new car to be financed via auto loan. In these types of scenarios you may approach credit unions or other car loan companies which can better accommodate your car loan needs.
Besides this information, banks have the requirement that the borrower should have a good credit standing. If you don’t have a good credit score many lending institutions will reject your application and it may be difficult for you to find one that accepts you. You should keep this in mind.
When you have a bad credit score, it will be hard for you to find lenders who offer the best auto loan rates. Nevertheless there are lending institutions that do not mind a bad credit history. It is important to research on this. With a few mouse clicks, you can easily find a loan company that perfectly suits your financial capacity which at the same time you meet the requirements needed.
There are many tools that may be used to compute your loan found online. One is advised to utilize such tools before applying for such a loan to avoid ending up paying high interest rates. One such tool is the auto loan calculator. It shows the figures you have to pay for a car loan the basis being the cost and the terms of the loan.
The majority of companies have sample auto loan interest rates computations on their websites. As such you are able to have an estimate of which loan interest rate would fit your budget. And also be advantageous to you without causing any burden to you. You should try to compare the rates of many companies to avoid overpaying due to lack of information.
Currently, it is quite easy and simple to look for the best auto loan rates we need if we know exactly what we are looking for. And we know the procedures and tools that we could maximize to come up with a sound choice. For more information about auto loan interest rates, visit: http://www.autoloansspot.com
More than 90% of cars sold on the market are financed, and as a matter of fact, even those with the means to purchase a car in cash prefer to finance their cars due to the low interest rates and incredible leverage currently available in the auto market around the United States. While financing a car may seem attractive, it is an important financial decision that, if not made properly, can hurt your financial situation much more than help it. This is why we decided to put together a basic guide to understanding what credit scores and factors are needed for you to buy your next luxury or exotic car.
In the dealer world, credit is very different than in the world of banking. It is important to understand that dealers deal with automated guidelines and wholesalers rather than bankers, allowing them much more flexibility based on their relationships with certain wholesalers at certain banks. In other words, just because one dealer can’t approve you that doesn’t mean another cannot do so with the exact same bank.
So what do dealers and wholesalers look for and how does this process work?
Most dealers have their own financial applications on their websites or on paper that helps them evaluate your credit before submitting it to banks (using a tool called Dealertrack) which allows them to submit to multiple banks at the same time once they know your financial situation. Good dealers are strategic in their approach and only submit you to one or two banks versus inexperienced dealers that send you to all banks. A good dealer will know the guidelines of the banks they submit to, making it easy to know ahead of time what you will qualify for.
So what do banks look for?
Obviously your credit score matters, and it holds a lot of weight, but there is also the LTV on the car known as the Loan to Value and your credit history (previously financed cars and your behavior).
The breakdown of your score is as follow:
720+ Tier 1: You have leverage and qualify for the best rate. It is likely that you will receive the best rate and term on your car loan.
650 – 720 Tier 2: You can still qualify for a loan, but the dealer may play hardball to sell you a higher rate so they can make more money.
600 – 650 Tier 3: While you won’t get a car based on your score alone, there is still hope; but expect to pay a premium in the rate you are given, and perhaps restrictions on the terms as well.
The second piece to the equation is your LTV (Loan to Value). When you buy a car, banks will use Black Book Value, usually aligned to NADA clean retail, to determine their liability and what your down payment should be. Banks are aware that dealers need to make money on their sale; and therefore, will allow LTV to go up to 120% of the clean retail meaning if a car’s value is 0,000, most banks will allow the dealer to finance up to 120% of that number which is 0,000.
However, the closer the value of the loan (total financed) approaches the 120% mark, the higher the bank risk; therefore, a higher down payment will be needed if your credit score isn’t above 720. The higher your score, the more lenient the bank is with letting you get away with less money down and a higher LTV.
Those with poor credit will need to stay under 80% in LTV because banks want to limit risks, and since dealers will typically not cut prices low enough, then you are required to compensate the difference in cash.
The third and final piece a bank looks for is your past history of cars financed and the total loan value of your previous cars. Banks don’t like people with no history and certainly don’t like people who go from 0 car payments to 00 car payments. They often favor those who systematically go up in amounts rather than make large jumps.
While the amount you are approved for is typically based on your income, the bank also understands that when you go past K loans, it is not a question of necessity, but rather preference and therefore will limit such preference by allowing reasonable jumps unless compensated by a bigger down payment.
Here are two scenarios for you to understand how this equation works from beginning to end:
a) Perfect candidate would be someone with 720+ credit score buying a car valued at under 100% of NADA clean retail value and with a history of past cars within 40% margin of past cars financed. This candidate qualifies for the best rate.
b) Bad candidate would be someone with an average or below average credit score trying to buy a car over valued by a greedy dealer and whose past history only shows cars around K but now wants to buy a K car. This guy will need a very large down payment and will most likely pay a high rate.