The average person needs to get some type of auto loan if they want to buy a vehicle. You may still have a loan to pay off on your current car that you plan on trading in for the new one. You can choose to go with the same lender, basically changing the amount and terms of your current loan, or you could look for a new type of lender to have lower payments. Some people have credit issues and find it hard to obtain a car loan. Regardless of your situation, there are a number of different types of car loans. Here are a few types you may want to consider the next time you are looking into getting a new vehicle.
Banks and Credit Unions
If you already have a relationship with a bank or credit union, they may be able to offer you a good interest rate on a car loan. This will be especially true if you have been a good customer with them for a long time and have a good credit rating. You may even be able to negotiate a lower rate with them if you can show that you have documentation of a better offer elsewhere.
A number of used car dealers are willing to offer in-house financing. These generally have a higher interest rate. However, if you have credit issues, they may be your best option. You may have to make weekly payments for a while to prove your creditworthiness but can then change it to a monthly payment. You may even be able to arrange for a lower interest rate at that time.
Captive financing is when the car manufacturer offers financing for new vehicles through the dealership. It is different than in-house financing in that you must have very good credit to qualify for the loan. It is not a second-chance type of loan; it is just one offered by the manufacturer to increase their bottom line.
This is the third type of loan you can get right at the dealership. However, the seller is not providing the funds for the loan. They get a loan from a lending institution in their name and then create a loan contract with you, adding additional interest to the loan as commission for them.
If you need a new vehicle, do a bit of research on the types of loans for which you qualify. If the only loan option you can get has a high-interest rate, go ahead and take it. Pay it on time and then apply for a new loan with a lower interest and lower payments.Share