Blog How to Find the Best Auto Financing with Great Rates

How to Find the Best Auto Financing with Great Rates

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Finding the right auto financing for your needs can be a big job. We’re here to make it easy.

Finding the best auto financing can be a tremendous challenge. There are a multitude of companies who offer auto financing, and the variety of options can be incredibly confusing. The following will help you find the best auto financing for your needs.

What is auto financing?

Auto financing allows car buyers to borrow money to purchase a new or used car. Banks or lenders provide auto financing, and there are many out there. The car you purchase acts as security against the loan and is known as a secured loan for this reason. The best way to find a lender is to do an Internet search.

Which banks or lenders offer auto financing? How do I find them?

 There are many lenders and banks who offer auto financing; they can range from big to small, local to national and international. To find out if your bank or lender of choice offers auto financing, do a quick Internet search. There are a number of large banks out there that provide financing. Some of the largest ones are:

There are also a number of smaller banks and credit unions that provide auto financing. Some of the small ones are:

In addition to traditional lenders, auto manufacturers also offer auto financing through their financing arms. A few of these include:

Online lenders also offer auto financing. Some online auto finance companies include:

You can also get an auto loan other ways, including using home equity or borrowing from friends and family. Regardless of the auto-financing path you choose, be sure to do your homework before you commit.

How does auto financing work?

Auto financing lets you borrow a set amount of cash to finance a vehicle you are purchasing. Each month you pay back a portion of that loan amount along with a set amount of interest. When you sign a loan agreement, you are agreeing to pay back the amount of principle you’ve borrowed, plus an agreed-upon amount of interest, over a set period of time. There are a few things you should know about auto financing terms

  1. The principle of the loan is the amount of money you are borrowing
  2. The interest on the loan is determined by your credit worthiness — AKA your credit score, the fees that a lender charges (sometimes termed lender fees) are also generally rolled into the interest rate or APR (annual percentage rate)
  3. The duration or term of a loan is the length of time that you’ll have to pay back the loan
  4. Most auto financing loans range anywhere from 36 to 72 months

At the beginning of the loan, you will pay down a larger portion of the interest on the loan. You won’t chip away much at the principle until the very end when you approach the payoff date. The interest rate or APR can vary greatly based on a number of factors, which include:

Should I get pre-approved for auto financing? Why?

Yes! To save money, you should get pre-approved for auto financing before buying a new or used car. Why should you get pre-approved?

Can I get auto financing with a 600 credit score?

 Yes, you can get auto financing with a credit score of 600 or below, but it may require that you pay more in interest or put more down on the car you’re buying. It may cost you more to buy a car because a score below 600 is considered poor credit. A credit score below 600 indicates that you have multiple late payments and/or you’ve failed to pay at all. Failure to pay is also referred to as delinquencies or default. You can become delinquent if you fail to pay just one month. Default happens when you are more than 180 days late, and the lender or creditor assumes you will never pay. When you have a credit score of 600 or less, you’re considered to be a subprime borrower. Subprime means that you have a poor credit history and will likely be charged much higher interest rates to secure auto financing. According to NerdWallet, at the end of 2017, the average credit score to buy a new car was 713. The average credit score to buy a used car was 656. Fret not, though. Almost 20% of car loans are granted to buyers with credit scores below 600. In fact, if your credit score is below 630, you could be denied auto financing. Don’t worry. Most auto manufacturers with financing arms are well versed in dealing with subprime borrowers. They likely will have options that may work for you. Additionally, auto loans offer a bit more flexibility than other types of financing, so most banks or lenders will have a product that will work for you. If your score is 600 or below, be sure that you can answer any questions that might come up about the negative notes on your report. To do that, pull your credit before you apply. Look over your report and note where any negative marks exist. Then, find a way to focus on the positive things you’ve done to repair or change the score. Proving and focusing on things like the following will help allay the issue of poor credit.

You’ll need to prove at least six to eight months of good payment history to convince a lender or bank that you are a good candidate for a loan. If you’ve been late on payments, explain why and provide detail of how you’ve worked to overcome those setbacks. Should you be denied a loan because of your sub-600 credit score, go to other lenders that specialize subprime auto loans. Some of those vendors include:

You can also do an internet search for subprime lenders who offer car loans.

How do I get auto financing if I have a credit score above 600? What are the best financing options for someone with a credit score above 600?

You can get auto financing with a credit score above 600 by following the same process you would for securing any loan. Do your research, apply, and wait to see if the lender approves your application. Any credit score above 630 is considered good. Generally, you’ll get far better interest rate. The closer to 850 your score is, the better — and the less interest you’ll pay. If you have a credit score above 630, many auto manufacturer lenders are your best bet, including:

Most dealers and auto manufacturers are accustomed to dealing with customers who have a wide range of credit scores. If you select a big bank and have a score of 630 or higher, it makes sense to check out some of the rates from the following lenders:

It could also pay to check with your local credit union and community banks to see what kind of financing rates they offer and find the best one for you.

What makes a good auto-financing partner?

 A good auto-financing partner will offer you a good interest rate and good term on your auto loan. They’ll also work with you should something arise and you have to adjust your payment schedule. By doing your homework and coming to the dealer prepared with pre-approved auto financing, you can ensure that you find the best auto financing for you.