Different Types of Auto Loans
Getting a new car can be a long and expensive process. Choosing between a new or used car and deciding on the model are all part of the process. Most people choose a low interest auto loan to finance their purchase. Madison Banking Rates has put together a list of the most common types of auto loans.
- Standard auto loan – Probably the best type of auto loan to apply for, standard loans require a good credit score. The better your score, the lower you can expect your interest rate to be. If you negotiate a larger down payment, your interest rates will also be lower. Shop around to find the best options for these loans.
- Buy here pay here dealership loan – For people with really bad credit, a dealership loan offers the chance to still finance a car. Extremely high interest rate and weekly to monthly payments can take their toll though. Late payments will be met with harsh penalties. Second chances are not offered. Choose this only if you have no other option. They can help build your credit back up, but only if you are incredibly careful about missing a payment or paying late.
- Online auto loan – When you apply for an online loan, you conduct the entire exchange online. Rates are usually lower. This can be really expedient for the really busy person, but be careful with your information. Identity thieves frequently set up scams which cause you to release your private information to them. Furthermore, do not submit too many applications or you might see a drop in your credit score.
- Student auto loan – For a young person with bad credit, a student loan offers the opportunity to buy a car anyway. Watch out for high interest rates. Consider asking an adult to cosign a regular loan instead, in order to get the lower interest rate.
- Sub prime auto loan – Similar to a dealership loan, sub prime loans are for people with bad credit. Although they also offer high interest rates, these loans offer more room for negotiation than dealership loans do. They offer a better way to improve your credit score.
- Auto loan refinancing – If you are having difficulties making your payments, this might be the right option for you. Refinancing involves taking out another loan to pay off the rest of the debt you have left from your first auto loan. It results in another five years of payments and a whole new batch of interest to pay, but it will help cut your payments in half, allowing you to pay off your debt and not default on your loan.
Once you choose which type of auto loan is right for you, let Madison Banking Rates help you find the lowest auto loan rates in your area, and help you save money.
