Online Car Loans 101

How to Get a Car Loan in Your Pajamas

Online Car Loans 101
November 6, 2014

Thanks to the power of the Internet, you can shop for cars online without having to drive to every automotive lot to look at the options in person. You can make comparisons to locate the best deal while saving on time and gas (or bus fare).

You can also shop for auto financing the same way. There are a large number of online vendors who would be happy to loan you money for a new car purchase. Just follow these simple steps:

  • Set Your Goals and Limits –Think about what you are looking for in an auto loan. What is the range of monthly payments that you can realistically afford? Online calculators are available to help you determine payments for different terms and loan amounts. Take any down payment money into account.

    If you have any other limitations such as preferring a short loan term or keeping your lender within a particular area, lay out your plans beforehand to avoid wasting your time with offers that do not meet your requirements.

  • Find a Lender – A simple check on your favorite search engine will provide you with plenty of options from which to choose. Consider whether you want a branch of a well-established national bank such as Wells Fargo, or simply want to look for the best deal possible.

  • Check Lender Reputation – Loan terms that appear too good to be true probably are too good to be true. Not all online car loan vendors are reputable. Research the companies and look at the nature of any complaints. Your car dealer may have recommendations, but do not be surprised if their recommendation is a financing arm of the dealer’s product line.

    Narrow your list to several vendors. Too many requests for credit can raise a red flag on your credit score. If you are going to get multiple offers, keep the number reasonably low and do it in a relatively short time to avoid a red flag.
  • Gather Documents – You are probably going to need the same set of information for all loan applications, whether online or in person. You will need information on the vehicle you want to buy, as well as personal information such as your Social Security number, job and housing information, and other standard credit check requirements.

    It is a good idea to check your credit score prior to the application process to avoid any nasty surprises.

  • Fill out Applications and Get Feedback – One of the greatest advantages of car loans is the rapid feedback. You will know very quickly whether you qualify for any lender.

  • Compare Your Offers – Choose the best deal for your situation, but make sure you are comparing equivalent loan terms. Car loans are typically from 3-5 years but some may stretch out as long as 7-8 years to lower the payments.

    With a longer term, you will pay less each month but you will pay significantly more in the long run in interest. Either approach may work for you – but it is important that you understand the benefits and drawbacks of both approaches. For example, if you choose a 7-year loan term, are you likely to even own the car that long?

Be sure to read the fine print on any offers before you accept them, and make sure that you fully understand any penalties and restrictions that are included.

With those simple steps, you can acquire a car loan in your pajamas with a minimum of fuss. We suggest that you change first before driving the actual car.

Your credit score affects the interest rates you'll pay for auto loans. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

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