Buying a new car is an exhilarating experience, and for most people, taking out one of the largest loans you will take out in your life can be a little nerve-racking. You should know in advance that several things can vary according to the lender you go with for an auto loan.
Interest rates are one of those things that are most likely to vary according to the lender. These rates are figured according to several factors, primarily your credit score. However, every lender uses a formula that sticks closely to industry lending standards but can vary slightly according to the assumed risk of lending you the money. The rates can vary by at least a few percentage points from lender to lender, which is why it is always good to work with a dealership that will send a loan application to multiple lenders to help you find the best rates.
Duration of the Loan Term
When you are searching for an auto loan and get quotes from different lenders, you may be surprised that some lenders will extend the duration of an auto loan for a longer than others. For instance, one lender may offer a loan term of five years and another may offer a loan term of seven. Of course, the attraction of the longer duration is the lower payments for most borrowers, but longer loan terms can also mean having to pay back more interest when the loan is paid in full.
Payment Configuration Options
In most cases, auto loan payments are set up monthly. In other words, you will make one payment at the same time every month towards your loan. However, there are lenders that offer alternative payment options for those who qualify. For instance, a lender may:
- Allow you to make two smaller payments a month
- Allow payments six times a year or every other month
- Allow weekly payments to keep the payments small
Income Bearing On Qualification
Yoru income is almost always considered when you seek an auto loan with a lender, but some lenders will use your income level more when they determine if you will qualify for a loan. For example, one lender may be more willing to accept a loan if you have not-so-good credit but a high income, but another lender may be more concerned that you have good credit in spite of your current level of income.