Auto Loans

by Kelly

Everyone needs a car.  Having reliable transportation for business travel, commuting, fun outings, and emergencies is imperative to today’s modern society. Without a car you are at the mercy of a lackluster public transportation system. Until the public transit in American cities is overhauled, a personal vehicle is the absolute best method of transportation.

The problem with getting a car, new or used, is that they are expensive. Any car is going to take a good chunk of one’s income to afford.  Most people cannot afford to buy a car outright, not without putting themselves in serious financial jeopardy. Luckily there is a great alternative to spending all of your savings on a new car: The Auto Loan.

Secured vs Restricted Loans

Auto Loans are loans you take out to be able to purchase a new car. Most auto loans are classified as both “secured” loans and “restricted” loans.  A secured loan is a loan that is secured by some for of collateral. The collateral ensures that the lender doesn’t lose all of their money should the borrower default on the loan. In the case of Auto loans, the vehicle itself is the collateral.

If the borrower fails to pay to make the monthly loan payments, the lender can take possession of the car and sell it themselves in an effort to re-coup their losses. A restricted loan refers to a loan that can only be used for a specific purpose, in this case, buying a car. The money that is loaned to you in an auto loan is only to be used to purchase a car, usually a car that is agreed upon by the lender.

How to Qualify for an Auto Loan

Auto Loans are a great way to purchase a car, but, as with any loan, you’ll need to qualify for the loan, and the better your qualifications, the better the terms of the loan.  To ensure that you get the best possible rate for you auto loan, its essential to follow these tips:

  • Make sure you have good credit.  While lower credit scores won’t preclude you from qualifying for an auto loan, the higher your credit score the more likely a lender is to give you lower interest rates and higher loan limits.
  • Apply for multiple loans. Shopping around for multiple loans is the best way to find the available rates.
  • Ensure you budget for the interest payments.  Make sure that your monthly payment is no more than 10% of the money you make each month.  Any more than 10% and you risk not having enough money for big expenditures and emergencies.

If you follow these tips you’ll be able to find a loan that lets you get the vehicle you want, all without breaking the bank. Applying for an Auto Loan gives you the opportunity to get the car you want, the car you need, and get on the road and start driving.  With a little bit of know how you can get the best rates possible and get a new vehicle right away.