Need an auto loan? Here’s what you need to know

Can’t decide which loan to get to pay for your new car? Here are some useful tips that could help to save you money.

It is reported that the average cost of a new car loan peaks at $31,722, so it’s important you make the right choice – and avoid paying too much.

If you’re looking to save money when taking out an auto loan, here’s what you need to know. We share loans based on their range of loan choices, top-notch customer support, approval process, and of course, the competitiveness of their loan rates.

Trethowans
Trethowans

1) LendingClub

Established back in 2016, LendingClub has since served more than 1.5 million customers. Most notably known for its three-step financing process, LendingClub does not have any hidden fees. The only catch is that the car being financed has to be less than 10 years old, with less than 120,000 miles on it.

You also need to have an outstanding balance of 5,000 to 55,200, and have at least 24 months of repayment on top. These multiple requirements might be hard to meet for some people, but if you meet all these conditions, you might consider LendingClub as a viable option for your auto loan.

2) LightStream

Famous for their quick turnaround rate and short lead time in approving and accepting clients for loans, this auto lender is a solid choice with great auto loan rates.

If you have an exceptional credit history, you can expect your loan to be approved from the get-go, and get loans from $5,000 to $100,000 with a competitive annual percentage rate (APR) based on the duration of your loan. It has no further requirements on the vehicle to be financed, making it a great alternative.

3) Bank of America

The Bank of America has an exceptional brand name and reputation , and the widest reach with offices in all 50 states, making it one of the most convenient options.

Bank of America offers auto loan rates based on the length of your desired loan. As usual, if you have a good credit history you can enjoy low rates of 3.19% for new cars, 3.39% for used cars and 3.99% for refinancing. Loanees are eligible for zero prepayment penalties if they repay their loan earlier as well. 

How to secure the best auto loan rate

When weighing up your auto loan options, how can you ensure that you secure the best rate? Here are some tips to help you.

1) Do your own primary research

It is best to search online, ask trusted people, or even go down to the offices yourself to get a better understanding of the offerings that you are eligible for.

Don’t assume that all dealers will present you with the best deals and rates, even if your credit history seems okay. Before you make any decision, compare the interest rates and decide from there, and avoid relying on dealer financing.

It’s a good idea to get approved first for the best loan available to you before you consult any dealer. Why? Firstly because you will have more cards to play, and are thus able to negotiate for a better rate.

Secondly, having some knowledge of the rates that you are eligible for informs you of whether the dealer has marked up the interest rate that they are offering you through the lenders they have collaborated with.

And finally, this knowledge prepares and prevents you from being duped into signing a loan that is way above what you should be paying and you can rest assured that the dealer would be unable to upsell you on a more pricey car that you cannot afford.

2) Be aware of your credit score

The interest rates of all of your loans are highly dependent on your personal credit score. So it is important to take note of your credit score and alter your expectations accordingly.

It goes without saying that those with better credit scores would be eligible for lower interest rates and vice versa. But if you have a not-so-stellar credit score, don’t despair. Instead, you should focus on working towards improving your credit score before you take out a loan.

A tip is to limit your loan shopping for a period of about two weeks to prevent your credit score from dropping too much before you take out a loan.

3) Choose a shorter loan period

A shorter loan period would amount to less money spent on paying the total loan. Longer loan periods have lower monthly payments, but simple calculations would show that these smaller monthly payments over a longer period will accumulate to a larger sum of money.

This is compared to if you were to choose a higher monthly payment with a shorter loan period. Should you find yourself having trouble making ends meet if you opt for the higher monthly payment option, it means that you may want to reconsider your current budgeting and financial situation before taking out any more loans.

4) Consider buying new

A new car will most likely have a lower interest rate than used cars, as people with poor credit scores often choose to buy used cars instead.

So do your own research and play the devil’s advocate. Is the used car worth the higher interest rate? Consider the car insurance that you have to buy too, which also has differing price points for used and new cars.

Take your time and find the best loan for you

Never rush into taking out a loan, especially if you don’t have money to waste (and how does)! It is always prudent to do thorough research before making any decisions; be it for financing your car or other big-ticket purchases.

There are multiple loan options to cater to people with different spending power and needs. For those with less-than-spectacular credit scores may want to consider pulling them up as this will not only benefit them in financing their auto car loan but also for their future loans.

Those with a decent credit score should also be on the lookout for additional discounts and hidden fees that less scrupulous dealers may try to sneak in while you are not paying attention.

If you’re all set to source for the right car loan for you, here are some of the best car loans to get you started.

Photo by Seb [ P34K ] Hamel