5MinuteAutoLoan.com Blog

When you think of purchasing a new car, the chances are that you may not have the money to pay for it straight away, so an auto loan becomes a necessity, especially if you need to commute to work. With just a little bit of research, you should be able to figure out what type of auto loan will work out best for you. Be smart about comparing rates and definitely check out loans with as many lenders as possible for a good bargain.

The first kind of auto loan and the most common is a loan that has a fixed interest rate. This necessarily means that your interest rate will not change over the entire period of the loan, and you will be protected from any hikes in interest rates during the term.

A variable-rate loan leaves you vulnerable and you may have to accept interest-rate risk, but it usually has a lower current interest rate compared to a five-year fixed-rate loan. Variable-rate auto loans will be based on the prime lending rate prevailing at the time.

A long term loan is usually only offered when you buy a brand new car, and usually lasts for thirty six, forty eight, or sixty months. This type of loan involves a smaller monthly payment, but you end up paying more over the term of the loan. One problem with a long term loan is that, the value of your vehicle may drop well below what you actually having left to pay on the loan.

A short term car loan involves a higher monthly payment, but over the course of the loan you end up paying less. On a short term car loan, you will more often than not, be offered a lower rate of interest than what was available with the long term auto finance.

You can get a home equity car loan, by offering up your home as collateral. Normally, this type of car loan carries a higher rate of interest, but there are also some tax advantages available, that can offset the higher rate of interest.

If you have taken out a loan on a car or equipment, and are finding it difficult to pay the remaining amount at the end of the term, then a “lease buyout loan” is what you need. You can downsize the price of buying out your lease by negotiating smoothly and at least, be able to get the purchase-option fee reduced.

How a lease buyout loan works is like this: a financing company will pay out the remaining balance of your loan to the leasing company. You, in turn, will pay the financing company in monthly payments. You have a better chance of re-negotiating a lower lease buyout deal with a small financing company, rather than with a big company.

A lease buyout loan is very helpful to small businesses that need some equipment or a company vehicle. Through a lease, it is possible to acquire these assets at a low monthly rate, with an option to buy it, at the end of the term. As a borrower, to qualify for a lease buyout loan, you must have a track record of financial stability as well a good credit report.

Very often leasing is much cheaper than buying, which is why people opt for a lease instead of a loan. Leases are available for a fixed period of three to five year. There is a fixed purchase amount at the end of that period. You can buy out the lease at the end of the term; with a “lease buyout loan”. The leased equipment or car may be used as collateral.

A home equity loan is basically the kind of loan in which you borrow, by using the equity in your home as security or collateral. A home that you own can turn out to be a very useful asset when you want to finance your personal goals. You can use a home equity loan to pay for the renovation of your home, settle your hospital bills or pay for a college education.

Home equity loans are of two kinds: closed end and open end. Both closed end and open end loans are secured against the value of the property and are referred to as second mortgages.

In a closed-end loan, you as borrower receive a lump sum and cannot borrow further at the time of the closing. While most closed end loans allow you to borrow up to 100% of the appraised value of the home, the maximum amount of money lent will be decided by factors such as credit history, monthly income, and the value of your home. An open end loan is a revolving credit loan, where you as a borrower can choose when and how often to borrow against your property. The lender will set a limit to the credit based on the same criteria that apply to closed-end loans.

When your credit score is bad, getting an auto finance loan can turn out to be a real challenge. Lenders can take advantage of the situation and charge you high interest rates, or car dealers can make you cough up huge monthly payments. When you have high payments and interest rates staring you in the face every month, you will make your credit score even worse if you default on them.

If you really need a set of wheels, try getting a subprime auto loan. This is one way to finance a car in spite of bad credit. Subprime auto loans are meant for customers with poor credit scores.  

A Sub-prime auto loan involves the sale of an automobile to a borrower who does not qualify for normal financing because of poor credit or erratic payment history. The buyer/borrower would be first required to give the dealer/lender, a down payment in cash, upon which the dealer would finance the balance of the purchase price on the car.

Most often sub-prime auto loans are given for used cars only. A Sub-Prime Auto Loan is necessarily a short term loan, which can be paid back easily and on time. This will help re-establish a good credit rating.

Are you wondering if a “no down payment” loan is a good option? Lenders will look at some factors to determine whether you’re eligible:

• How reliable you’ve been when making payments
• How your credit score may have changed.
• How the value of cars may have changed

Getting an auto loan with no down payment is an easy way for a person to buy a car. This type of loan offers borrowing without any collateral or down payment. If you have a trade-in vehicle, most dealers will accept it as equivalent to cash down, and issue an auto loan with no down payment. The trade-in will help lower monthly payments for the life of the loan.

Check out the principal, interest, and fees so that when you apply for an auto loan with no down payment, you can see exactly what it will cost monthly, yearly and for the term of the loan. You must make sure that the auto loan with no down payment, does not outlive the life of the car.  

 One advantage is that the financing for this kind of a loan comes from two sources - the value of the vehicle and the money financed. As a borrower you should work towards steadily improving your credit rating and shop around for an entry-level car that is pretty basic and reliable, not fully loaded with extras. If you’re a first timer, try and get a term for 3-4 years or less, so that you can pay it off on time, repair your credit, and finish off with a vehicle that still has good resale value.  

Every active service person is eligible for a military auto loan. These loans are usually customized to suit the needs of
America’s service people and their families. Military auto financing are incentives for military personnel on active duty, in appreciation of their service to the nation. These types of auto loans also come with special discounts not usually given to civilians.

A car loan for military personnel works in pretty much the same way as that of a civilian. The service person approaches a lender for a loan through their credit union or bank. Once approval is obtained, a discount is fixed, depending upon factors such as the person’s credit history.

However, it is important that service people also shop around for the best terms at many financial institutions, before concluding a deal.

Look for the best plan that matches your budget and needs. A lease may be better if your car is only going to be used minimally. Make sure that you can afford the car purchased, in the long run, and that you can make the required monthly payments, as well as the overall costs to own it.  

Students who need to commute to schools or colleges can look at options of buying a car on a student loan. Most students who live on a rather tight budget, have to be careful about getting into debt, and must weigh their options carefully before committing to an auto loan. Auto loans for college students have actually become much easier now than ever before, what with the several online and offline options available. However, while looking for your perfect car in the classifieds, it is important to plan your budget well in advance, too.

First, you should decide whether to buy a new or used vehicle. It’s no secret that it makes better financial sense for a student to buy a used car. A certified or pre-owned vehicle can save you big bucks as well as be reliable. Used cars may be cheaper than new cars, but also come with expenses like insurance, fuel and maintenance, which can add up to quite a bit. So it is important to consider these expenses along with loan payments, while calculating the cost to own a car. Most often student auto loans offered by banks, financial companies, car manufacturers and car dealers, offer cash rebates, attractive APR rates and flexible payback terms.  

Look for the most reliable and affordable vehicle that your money can buy. Do some research in online car sites to collect information on what you really want? Check the vehicle’s history and vehicle identification number (VIN) to ensure that it hasn’t suffered any serious damage through its service history. Look for rebates and cash back bonuses, zero or flexible down payments, deferred payments and zero percent financing or low interest rates, when you consider a college student loan.