What Does an Auto Loan Involve?

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 15, 2017

When it comes to buying a car, the average person seeks an auto loan. No matter their situation, a car loan can be a great way to build credit. Regardless of credit, there are four auto loan basics potential borrowers should be aware of.

When it comes to buying a car, the average person seeks an auto loan. No matter their situation, a car loan can be a great way to build credit.

The Basics of Financing a Car

A potential buyer can seek financing from several sources, either directly – from banks, credit unions, or private lenders – or indirectly through a dealership. But consumers with less than perfect credit typically require subprime lenders who only work through special finance dealers.

Regardless of credit, there are a few auto loan basics potential borrowers should be aware of:

  1. Loan Principal – The original amount borrowed.
  2. Interest – Money paid, at a regular rate, for money lent. Typically, all loans carry interest unless a borrower qualifies for a manufacturer’s special financing offer. Interest rates vary by credit score, so a higher credit score usually equals a lower interest rate.
  3. Term – The amount of time to repay a loan. Auto loan terms are referred to in months, and typically range from 48 to 84 months. A good tip: keep loan terms as short as possible. Over time, longer loans cost more due to increased interest charges.
  4. Down Payment – An initial payment made when buying something on credit. Lenders often require a down payment, especially if a borrower is dealing with credit problems. A down payment saves borrowers money by reducing the loan amount.

More Qualifications for Less Credit

All auto loans carry specific requirements which vary by lender. Buyers who are seeking bad credit car loans have to meet qualifications borrowers with good credit don’t.

Typical bad credit lender requirements include:

  • A minimum gross monthly income of $1,500 from a single source along with proof of income with recent computer-generated pay stubs that include year-to-date earnings.
  • Three years of employment history with no gaps of more than 30 days, and a minimum of six months on a current job.
  • A current utility bill for the address on the loan application in the borrower’s name to serve as proof of residence.
  • Proof of a working landline or contract cell phone in the borrower’s name.
  • Six to eight complete personal references with names, addresses, and phone numbers of friends, family, or co-workers.

Knowing Where to Start

When it comes to car buying, CarsDirect is an invaluable source for people in many credit situations. We have you covered whether you’re looking for reviews of the latest makes and models, or trying to find the best deals available.

If you’re struggling with bad credit and need to find a local special finance dealer, let CarsDirect guide you. We work with a nationwide network of dealers that have the lending resources available to help. Our process is free of cost and obligation. All you have to do is take the first step by filling out our online auto loan request form. Get started today!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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