There’s this freedom that comes with having your own car. But you can’t enjoy this freedom if you have a car loan that makes the debt an unbearable burden for you. Although the good news is that modern technology has made it easy for you to get approval for a new or used car loan with any of the best car loan services.
Have you been thinking about how to obtain a car loan or refinance an old car loan you have already? Then you’re at the right place. With this guide, you’ll know all there is to know about car loans, and also find out the best places to get this type of loan in 2020.
1. LendingTree
This is one of the best car loan services for comparing loans today. It has been in business for more than 20 years. Over the years, LendingTree has connected millions of borrowers and lenders for various loan types, including car loans.
LendingTree has a vast network of lenders and this helps borrowers to get the best rates for new and used car loans. By weighing different loan offers, customers can easily choose the best possible rates. It also has an on-site calculator so you can see how the type of car loan you choose will pan out.
Pros
- Has an excellent mobile app
- It’s a trusted name in the industry
- Provides extensive educational resources
Cons
- Not a direct lender
- It only offers loans to people within the United States
2. OneMain Financial
This company is specifically for borrowers who find it hard to get car loans via conventional means.
Do you have a low credit score or low budget and you want to get a car whether new or used? Then you understand that frustrating it is when you get your loan application rejected severally. But with OneMain Financial, one of the best car loan services, you get flexible loans that can be used to buy your car.
You have two ways you can apply for a loan from OneMain Financial: through its website or through its over 1,500 branches around the country. Also, you have to bring some documents, but their requirements are not stringent. You can easily get a loan from this company.
Pros
- It has fixed rates and fixed payments
- Streamlined online application
- It has a personalized service with over 1,500 branches
Cons
- Origination fee included
- It has higher APRs compared to other auto loan providers
3. MyAutoLoan
MyAutoLoan is yet one of the best car loan services in the country. It is good at helping you compare and review loan offers. You can compare about four loan offers at the same time, and with its fast online process, you can get loan offers within minutes of applying.
It also has a variety of financing options with a wealth of online tools including an online calculator that all help you to obtain that loan.
Pros
- Free tools and calculators
- It has an easy and free online comparison tool
- Low-interest rates
Cons
- It’s not a direct lender
- It is limited to in-network lenders
4. Gravity Lending
Gravity Lending is a platform where borrowers can meet multiple lenders for easy access to auto loans or auto loan refinancing. It’s so quick that you can get refinancing on the same day with such low rates as 1.79%.
If your credit score is good, Gravity Lending will provide you with multiple offers from lenders who want to finance your business.
Pros
- A+ Better Business Bureau rating
- It has very low starting rates
- Provides quick funding
Cons
- You must have 600+ credit score
- It’s not a direct lender
5. Monevo
It’s one of the top companies in the loan industry. Monevo gives consumers a fast and accessible way to obtain loan offers from lenders with a strong reputation for all manner of loans. Its car loan options are flexible and easy to obtain from trusted lenders.
Monevo partners with industry leaders such as Earnest, LightStream, and Upstart. Therefore customers can be sure that they are dealing with credible lenders. It has APRs that start at just 3.99%, so Monevo is one of the best companies to get a car loan quote form.
Its partners have flexible repayment terms that start from 90 days to as much as 144 months and coupled with its huge network of lenders, Monevo has partners that will cater to any credit score.
Pros
- You can get the funds as soon as the next day
- It works with the most trusted names in the industry
- Low APRs
Cons
- Not a direct lender
- It has lesser information on the website than competitors
6. CarsDirect
CarsDirect has been in the business of new and used car loans for over 20 years. It is excellent for those with bad or no credit as it has flexible requirements for approval.
CarsDirect is different from other lending platforms as they offer a more personalized touch to their lending process.
You’ll always work with a personally trusted dealer, and you can always meet them with questions. Its customer service is free as it partners with well-known used and new car loan companies, and CarsDirect takes you through each and every step of the process from start to finish.
Pros
- It works with all types of credit
- Network of trusted dealers
- Works with trade-ins
Cons
- Not a direct lender
- It makes use of considerable upselling
7. CarLoan.com
This is a free platform where you can find and compare several loan offers at the same time. This helps you to save time and money by filling one form, and with it, you can review the best loan rates available. The process of applying for a loan is easy and can be done in a few minutes and within two days, you can get rate quotes from lenders.
You can use its online calculator to determine how much you can repay every month according to your budget and your credit score.
Pros
- Has useful online tools
- Its credit check will not affect your credit score
- Works with all credit scores
Cons
- Not a direct lender
- Its website is outdated
8. AutoPay
This company focuses on the modern customer. It has an easy, smooth, and online-only application process. It also has a vast network of trusted lenders with transparent terms. No matter who you are assigned to, AutoPay will make sure you’re covered.
AutoPay is a digital marketplace that lets borrowers meet with potential lenders. It makes it simpler to find the most competitive rates for new car loans and car loan refinancing.
The company’s main values include impact, optimism, honesty, and growth. It also offers some helpful online tools, including a blog filled with useful articles.
Pros
- Easy online process
- Provides lots of educational resources online
- Straightforward and transparent process
Cons
- Only a marketplace, not a lender
- It has no direct loan details
9. PenFed
With PenFed, car loan rates for 36-month new and refinance loans usually start as low as 2.14%, but used car loan rates start as low as 2.99% for a 36-month term. However, deep discounts are available for members who make use of the credit union’s car buying service. Such rates start as low as 1.39% APR for a new car and 2.24% APR for a used vehicle.
But you’ll have to become a member of the credit union and hold that membership for a minimum of 60 days for you to be able to access those rates, but the requirements to join are easy to meet.
Membership is open to current and former military members and their families in all 50 states including Puerto Rico. People with no military connection can join by making a one-time donation to the National Military Family Association or make a $15 offer to the Voices for America’s Troops.
PenFed’s car loans usually start as low as $500 and move up to $100,000. This is a wide range that is better than many of the lenders out there.
Pros
- Offers new, used, and refinance loans
- Loan amounts from $500 to $100,000
- It gives rate discounts for using its car buying service
- You can borrow up to 110% of the vehicle’s value
Cons
- The high minimum loan amount for longer terms
- Excellent credit history required for lowest rates
- Membership in the credit union is required
10. Consumer Credit Union
Consumers Credit Union (CCU) offers car loan rates to its members for as low as 2.69% for new car loans for up to 60 months. Similar to other credit unions, you have to be a member, but it’s fairly easy to join.
You can become a member by making a one-time payment of $5 which is a membership fee and have at least that much in a savings account. There are also no geographic or employer restrictions.
However, it does have a minimum loan amount. Your loan will be approved based on information like your credit score, credit report, and vehicle information. It also has no minimum loan term. This means that you can submit a request based on what you need.
Normally, borrowers with good credit qualify for the lowest rates from the Consumers Credit Union. However, members who have average credit can get discounts too. It provides a 0.5% discount for people who autopay from a CCU account. The discount goes to 0.25% for those who pay automatically from another financial institution.
Pros
- Offers new, used, and refinance auto loans
- Transparent rates and terms online
- It is a well-known financial institution
- Quick financing decision
Cons
- Restrictions on the vehicles it will finance
- High minimum loan amount
Frequently Asked Questions
1. What is a car loan?
Customers can easily find lenders that are willing to help them with loans for different reasons, of which car loans are among. If you are interested in buying a car online, there are various lenders you can approach with different rates and terms.
Some dealers also give loans, offering people without any other option an alternative way to own cars.
2. What’s the difference between a car loan and other loan types?
Security: Auto loans are usually secured, that is, the vehicle procured also becomes the collateral. Although the lender can seize the vehicle if the loan isn’t paid, secured loans also mean better and favorable interest rates and terms.
Low-Credit Friendly: Due to the fact that vehicles are smaller investments than buildings or small businesses, and also because vehicles are gotten through secured loans, there are fewer requirements for a high credit score. Also, car loans are usually shorter, making them easier and more favorable for customers.
Flexibility: Purchasing a car online through auto loan offers more flexibility as you can also use an old car to reduce your payment to an extent. You can also increase the frequency of your loan repayment to increase your repayment timeline.
3. What are the differences between new and used car loans?
The major distinction between a new car loan and a used car loan is that the interest rate of a new car loan is likely to be lower than that of a used car loan. If you have good credit, then this difference might not be much, but if you have poor credit, then the difference can be quite large for new and used car loans.
Also, some car manufacturers provide special rates and bonuses on certain models, giving you an incentive to purchase a new vehicle instead of a cheaper old model.
New cars are likely to be costlier than used cars, and as such, new car loans can be costlier than old car loans. This means that even if you have a lower rate of interest for a new car loan, the principal will be higher and this usually means that you have to pay more.
4. How do I refinance car loans?
This is an intelligent option for car owners. This means that you can pay less over the duration of a loan because you exchange the loan with one with a much lower rate of interest. You may also be able to negotiate better loan terms that can help you repay without problems.
Although it’s technically possible to refinance your car loan anytime you want, review your options before making the move to be able to make a good deal. Make sure you take note of these things before you refinance your loan:
- The best time to refinance your loan is before three months have passed starting from the original date you took the loan. This is because you may have a bad credit score due to the various credit checks and lack of time to build up your credit score. So getting a better interest rate will be hard, and your credit score might suffer more than it has.
- It is advisable to consider refinancing your car loan from six months into a loan; it is even better to do so after a year.
- For the first time, you’re purchasing a car, it is good to wait for a full year before refinancing. This provides you with an opportunity to increase your credit score and show lenders that you are credit-worthy.
Refinancing is also best if you want to add or remove a signatory to your current loan. It is good to take a loan with a signatory if you can’t get your loan request approved. However, a signatory may not want to be burdened with your loan for its entire duration, so refinancing is an excellent way of removing the signatory. This is increases your credit score.
Another option is to include a co-borrower in your loan. It can be in the form of a business transaction or your own way of alleviating the financial burden of a huge car loan.
Car Loan Amortization
Car loan amortization is a good way to settle your auto loan. When you make a payment to your loan provider each month, the money is split into three parts:
- Principal
- Interest
- Fees
The principal means the main loan amount you took to purchase your car. The interest means the percentage that you pay to the lender for their services, and the fees represent any additional expenses that might come with the loan.
Car loan amortization works in such a way that the amount of your payment that is put into each category will change over the duration of your loan.
At the start of your repayment, when you still have a high principal to repay, a major part of the money will be used for interest. But as the principal gradually becomes smaller, the amount allocated to the interest drops like that of the principal rises.
The amount of your down payment, rate of interest, and the duration of your loan will affect the schedule of your amortization.
5. How to get the best car loan
Optimize Credit: Make sure you are aware of your credit score before trying to get an auto loan. Fix all errors in your credit report before you apply for a loan and you’ll save lots of money during the time for repayment.
Avoid a Monthly Payment Mindset: It’s best to consider the overall obligation when searching for a good loan to purchase a car. Don’t just consider only the monthly payment. Yes, it’s easier to think about the monthly payment, but it doesn’t take into account the maintenance, insurance, and other expenses.
Deny the Dealer: This tip is best if you have no other option available. It involves taking dealership loans to buy a car. Of course, dealers would offer you a loan, but their terms are usually unreasonable. This is why you should consider this option as a last resort.
6. How to find the best lender for your loan needs
If you are applying for a loan from different platforms, it’s best to finish the applications within two weeks of the others. For every loan application, your credit score will temporarily drop. By organizing your applications this way, they will be regarded as one request, therefore making your credit score stable.
Make sure you look for the best deals and the best loan terms when buying a car through an online dealer.
Make your lenders compete by asking for pre-approval, which means that a lender is willing to lend you an amount of money at certain terms. With these pre-approval papers, you can make other lenders offer you better terms.
7. Things to watch out for
Make sure you check for some things in the loan contract before finalizing. The first thing to look for is payment penalties, which might prevent you from paying the loan ahead of time. These penalties are extra fees that a lender will charge you for paying extra amounts in order to reduce the duration of your loan. Be sure to know what to expect before signing the contract.
Another worrisome thing is mandatory binding arbitration. This means that should you have a problem with your lender, the case will not be settled by the court but by an arbitrator. This is not good for you.
Interest rates that vary can also be found in a loan agreement. Although they are not necessarily bad, they can mean higher interest payments in the duration of a loan.
Finally, make sure that any changes to the agreement will be made in the final version of the loan agreement.
Take your time to review the best car dealers around before making your final decision. Choose the one that will help you get your dream car at an affordable budget.
Conclusion
Getting a low car loan rate can save you money during the period of your loan. However, before you start shopping for a vehicle, you should get quotes from several different lenders. You can try to get rates from credit unions, banks, and non-bank lenders for the best rates.