Getting an Auto Loan for Your New Vehicle
Some financially savvy people may have planned ahead and saved up for an automobile. These people are able to pay cash for a car, truck, minivan, motorcycle, or another form of transportation. While this is a great situation to be in, there are many people out there that aren’t able to plan ahead and save up like this.
Many people may find themselves needing a vehicle even though they don’t have the cash for one. Are these people out of luck? Absolutely not! Thankfully, there are companies out there, like King of Kash, that help people get the vehicle they need.
What is an Auto Loan?
How do these companies help people purchase vehicles? These companies offer auto loans. An auto loan is where a financial institution loans a buyer money to purchase a vehicle.
This type of loan is a secured loan, meaning that collateral is required. The vehicle is used as collateral, which means that, if a person does not make their loan payments, the lender comes and repossesses the vehicle. This is often a big motivation for people to repay the loan, as they want to keep their vehicle.
This type of loan is also known as an installment type loan. This means that the person borrows a set amount of money all at once. The person then makes equal monthly payments for a specific amount of time in order to repay the loan.
An installment loan is different from a credit card loan, as a person could borrow more money from a credit card company if they chose to do so. With an auto loan, the person only borrows money a single time. They then make equal monthly payments until the loan has been paid off.
A person can always choose to pay more towards the loan if they want to, but this is not required. Why would a person choose to pay a little extra each month towards their auto loan? Paying the loan off early can mean saving money on interest. Always read the terms of the loan to see if there is a penalty for paying the loan back early.
How to Apply for an Auto Loan
Applying for an auto loan is pretty easy. Many lenders allow a person to apply online, meaning that they know if they are approved for the loan before they even leave the house. Some lenders may require a person to come in and sign forms, but many lenders have moved to a completely online and digital loan process.
The lender will need to see proof of employment. They will want to make sure the person applying for the auto loan has a job so they can afford to pay for the vehicle. They may ask for a W2, paycheck stubs, or a letter from the person’s employer.
The lending company will also need to verify the person’s identity and home address. They will ask for a state-issued ID. They will also need the person’s social security number, as they may need to do a background check. The lending company will need to verify that the person applying for the auto loan is actually who they are claiming to be.
What are the Repayment Terms?
Many people worry that they won’t be able to afford the payments on an auto loan. This is why it is important to pay attention to the repayment terms. Many times, a lender can stretch the loan out for a long period of time, therefore reducing the monthly payment.
For example, if the monthly loan payment looks too high, look to see how many monthly payments will be made. If the terms are set at 36 months, or three years, ask the lender if they can stretch the loan out to 48 or 60 months. The person will be making payments on the loan for a longer period of time, but those monthly payment amounts will be lower. This can help make the auto loan more affordable for those on a strict budget.
Those that can afford to pay more per month should look at shortening the loan terms. This means the monthly repayment amount is higher, but the interest paid should be lower. Why would someone want to pay more each month? The vehicle will be paid off faster, meaning that they own it outright sooner.
Who May Qualify for an Auto Loan?
Any person with a stable income, proof of employment, proof of identity, and proof of home address can qualify for an auto loan. Those that apply and are unsuccessful on their own may still have a way to get approved by applying with a co-borrower. Having a co-borrower is a great idea for people who don’t get approved for an auto loan all on their own.
What is a co-borrower? A co-borrower can be a spouse, sibling, parent, family member, or a close friend that agrees to be on the loan. This means that if a person stops making their loan payment, the co-borrow may be held responsible for the debt, and may be required to start making payments for the vehicle.
The co-borrower will need all of the supporting documents that the original borrower needed. The lender will need proof that the person has a job, that they are who they say they are, and that they live where they claim to live. As long as the payments are made on time and the main borrower stays on top of things, the co-borrower may not even have to even think about the loan at all.
Many People Use Auto Loans to Buy Vehicles
In conclusion, many people take out auto loans to buy vehicles. While some people may be able to plan ahead and save up for a vehicle ahead of time, not all people are that lucky. This type of loan can get people behind the wheel and give them a way to get back and forth to work that does not involve taking public transportation.