Financing Options for a Car Loan

Having transportation is critical in life and many of us have had the need for a car loan at one time or another. Often a first car is a time when people take out their first loan. Regardless of how much you have financed or not in the past, you want to know the basics of where to shop around for the financing of your vehicle. Here are the main places you can finance the loan for your car.

Credit Unions A credit union is a great option if you are lucky enough to be a part of one. This was my situation with my first car loan, and it really helped me in my financing. I also had my paycheck directly deposited, as well as had them take out my payment every month for the car. It wasn't until I was much older that I really appreciated that. Credit Unions can often be the place where you will find the lowest interest rate around. This is what you want so you are paying the least for your car overall. So, always try this route first, the credit union when its time to take out a loan for your car.

Banks & other Financing Companies Always start with your own bank that you belong to, as they know you best and may give you a bit of a deal compared to a complete stranger. Often, banks and other financing companies will give you a good interest rate, so shop around. They know you have options, so they have to be willing to give a little to get your business. It is in their best interest to keep you for the loan you are going to take out anyway.

Borrowing Online With more people getting online, the competition is growing for your business when it comes to a car loan or any loan really. The convenience factor is very nice. I would ask around, as I tend to not be as trusting of a place and people I can't see, though sometimes being in person doesn't mean you are automatically getting a more trustworthy business transaction. People apply for loans online, and before you do, again try to do your homework for the most trustworthy sites. You often are giving a lot of personal information and you don't want to have to deal with any fraud or exposure of information. There are ways of doing it safely. I would recommend a background check and be extra cautious.

The benefit to taking out a loan with the dealer, is that you are right there, and they make it so easy to do. The thing is, they most always actually finance the car through another source anyway (bank or finance company) and keep a portion of the financed amount for themselves. So you are paying them for this service basically (which I am not suggesting is unfair, and just to be aware). The higher the interest rate, the more they get paid for financing your loan. So shop around for those rates! If you can have the patience, wait until you hear about dealerships offering low interest rates. Sometimes you will hear about a zero percent financing, and this is an excellent time to buy. They will do this sometimes if they are trying to "move" certain models to make room for others.