Planning for a Bright, Financial Future

If your car is getting older and is not reliable as it once was, you might want to consider trading it in for a newer vehicle. When you trade your old car in, you can choose a newer, more dependable vehicle. To accomplish this goal, though, you will likely need an auto loan. Before applying for a loan, you might benefit from knowing the following three things.

Specific Factors Affect the Interest Rate

The first thing to know about auto loans is that the interest rates vary from lender to lender. When you apply for an auto loan, lenders will review your credit to determine if they are willing to issue you a loan. Your credit score affects your ability to qualify for a car loan, and it also affects your interest rate. People with outstanding credit scores get the lowest interest rates on car loans. People with poor scores pay higher rates.

The second thing that affects your interest rate is the length of the loan. A shorter-term loan generally offers a lower interest rate. If you want the lowest rate, consider opting for a 36 or 48-month loan instead of a 60 or 72-month loan.

The other factor that affects the interest rate is the age of the vehicle. New cars typically offer the lowest interest rates possible, whereas you will pay a higher rate for older vehicles.

Limit Your Search to 14 Days

If you want to compare some loans from different lenders, you might want to aim to limit the search to 14 days. If each lender checks your credit, it can harm your score. When all the lenders check your score within a 14-day period, the credit bureaus view these inquiries together. Instead of each one affecting your score, they view all the inquiries as only one credit search.

Your Trade-In Might Increase the Loan

The final thing to know when getting an auto loan is that your trade-in might increase your loan amount. If your car is not worth as much as you currently owe on it, you will have to pay the difference. You can add the difference to your new loan, which will cause it to increase.

Getting a car loan is the most common way to buy a car today, and you might want to compare a few auto loans before selecting one. To learn more about auto loans, contact an auto loan service.