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Lenders help customers borrow money for a variety of purposes, and not surprisingly, one of these reasons is to buy a vehicle. In fact, because cars, motorcycles, and other modes of transport have become so integral to everyday life, auto loans written specifically for their purchase are now one of the most popular forms of financing available.
Consumers who need a vehicle can approach a variety of lenders and receive different terms and car financing rates for their loan, which is usually enough to buy the car from the dealership outright. Dealers themselves can offer loans as well, giving people with no other options a way to become mobile even without the cash to do so. Review the chart below to discover the top auto loans today.
LendingTree is a marketplace where you can set your parameters and then receive a list of relevant loan providers. One of the perks of LendingTree is that you fill out one application and can then review multiple loan options.
Vast network of loan providers means competitive rates
Work with all types of credit
Not directly a lender so rates and terms vary
Lack of information about specific loan types and terms
MyAutoLoan is a lending marketplace that lets customers find the right loan solution for their auto purchasing or refinancing needs. The company has developed proprietary technology that can help them easily and effectively match lenders to borrowers based on their needs.
Simple and efficient pre-qualification process
No offerings for borrowers with credit score of less than 600
Receive funds in 24 hours
High minimum loan amount
RateGenius is a middleman that connects you with relevant lending companies. It offers a streamlined application process and boasts a network of 150 lending institutions, giving you a good chance of finding the best auto refinancing loan to suit your current situation.
Experts help find the best refi rates
No new or pre-owned auto loans
Straightforward and quick application
Focus exclusively on refinancing
Transportation is crucial for working professionals, parents, and people young and old alike. Imagine how limited one’s money-making potential would be if they could only rely on their own two legs to deliver them to work. People would need to live in an urban environment for proximity to jobs, and would not be able to leave the public transportation network. Parents could not pick their kids up from school or drive them to soccer practice, and families would not be able to easily visit relatives in faraway places. Vehicles are necessary for giving people the freedom of mobility to get where they need to go with little effort.
Despite their importance, even the cheapest cars still require an investment of thousands of dollars. This is the main reason why auto financing companies are particularly useful. They provide customers with a loan for the explicit purpose of buying a vehicle, and can do so with affordability and flexibility.
What sets an auto loan apart from an all-purpose bank loan, mortgage, or line of credit?
One difference is that all auto loans are secured, meaning that the vehicle the loan is intended for also serves as the loan’s collateral. Failure to make payments could result in the lender repossessing the vehicle to cover the rest of the obligation, but secured loans also result in more favorable interest rates and loan terms.
Another major area that sets auto loans apart is their credit requirements. Generally, because a vehicle represents a smaller investment than a house or small business, and because it is obtained via a secured loan, the bar is set much lower. Those with low or poor credit are still able to obtain a reasonable auto loan, whereas this may not be the case for other types of loans. Car loans are also comparatively short, lasting a maximum of around 7 years, making them less risky and thus more favorable for customers.
Auto loans are also quite flexible. Borrowers can trade in old cars to reduce their obligations to a degree, pay on a more frequent schedule to speed up the timeline of their loan repayment and improve their car loan interest rates, or even take a loan that allows them to replace their car mid-term for a different model.
Before attempting to get an auto loan, it is highly recommended that you thoroughly explore your credit report. Each score from the Equifax, TransUnion and Experian credit reports is highly relevant to how lenders view the creditworthiness of their potential borrowers, and therefore the terms and car loan rates they extend. By fixing erroneous entries that may reside on a credit report before applying for an auto loan, you could potentially save thousands of dollars over your repayment term.
For those already shopping around for an auto loan, it is suggested that they think in terms of the total obligation and not just the monthly payment. While a monthly payment may be easier to consider, it does not account for maintenance, insurance, or other financial emergencies. Anyone can “afford” a new sports car in monthly payments, but they do not consider that it is only affordable because the duration of the loan has been lengthened to the maximum amount of time available. This heightens the risk of having an underwater loan near the end of the term, where the remaining amount owed is worth more than the car itself, not to mention that by this time the car is older and is likely to encounter more costs.
Another tip is to use the dealership loans as a last resort. Dealers will grant almost anyone a loan, and offer less than reasonable terms. In fact, most of the money that dealerships make off the sale of a car is not from the car itself, but rather the financing. For this reason, dealership loan offers should not be entertained unless it is with a stack of other offers to compare against.
Lastly, do thorough research! Nobody should finalize a loan from any source until they check the Better Business Bureau, online reviews and even regulatory bodies.
When applying for loans from a variety of sources, it is very important to complete the applications within 2 weeks of one another. This is because each application is a credit inquiry, which temporarily lowers a credit score. By doing them together, they all count as only a single inquiry, keeping credit scores healthy.
Shopping around is necessary to obtain the best terms for a new or used car loan, so check out all the local sources. This might include banks, online auto loan lenders, credit unions, peer-to-peer sources, or the dealership. Key in getting the best deal is approaching each lender with the offers of the others, because it takes competition for any market to produce the most ideal offer.
Stir up the competition by getting proof of one’s on-paper offer. This is called pre-approval, which is basically a blank check from a single lender that illustrates how much they are willing to lend, and at which terms. Having these pre-approval papers handy when dealing with another lender will force them to match or eclipse the offer, or risk the potential borrower walking away.
There are a few things to check for in the loan contract, before it is finalized. First on the list is prepayment penalties, which restrict your ability to pay back the loan ahead of schedule. Those who make extra payments to reduce the term on their loans are hit with fees that negate the efforts, so if paying off an obligation quickly is important, ensure this is not a feature in the contract before signing it.
Another potentially troublesome clause is called mandatory binding arbitration, meaning that if the lender and borrower get into a dispute, it will be settled out of a court of law by an arbitrator. This puts the borrower at a disadvantage.
Variable interest rates might also find their way into an auto loan agreement. These are not all bad, but can mean higher interest payments over the life of the loan depending on how rates evolve over time. Always calculate monthly payments based on the highest rate, if this is the case, or risk getting an unaffordable loan. Very low interest car loans are often variable rates, which may be a great bet for you, but can cost more long term.
Last, but not least, it is always important to make sure that any agreed upon changes to the contract make it into the final version.
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 3.49% APR with a term of 3 years would result in 36 monthly payments of $292.98.
** All loans made by WebBank, Member FDIC. APR is the Annual Percentage Rate. Your actual rate depends upon your individual credit score and other key financing characteristics, including but not limited to the amount financed, term, a loan-to-value (LTV) ratio and other vehicle characteristics. Available APRs range from 2.24% to 24.99%. Best APRs are available to borrowers with excellent credit. Advertised rates are subject to change without notice. Vehicle restrictions: Auto refinancing through Lending Club is only available for vehicles that are 10 years old or less and have 120,000 miles or less. Refinancing is not available for Hummer, Pontiac, Saturn, Daewoo, Isuzu, Suzuki or Oldsmobile vehicles. Refinancing is not available for diesel Volkswagen vehicles, Dodge Neons, or any commercial vehicles. Existing loan restrictions: Auto refinancing is available for existing auto loans that have been open for at least 2 months, have 24 months or more remaining on the term and have $5,000 to $55,000 in outstanding balance. Fees: Title and state fees may apply. Additional vehicle and existing loan restrictions may apply, depending on credit quality.