Auto Loan Financing Tips You Shouldn’t Ignore

During my teenage years, I was fortunate enough to receive my first car as a gift from my mother. Once it was time for a new set of wheels, I quickly drove to the nearest auto dealership and started my search. Little did I know, getting a good deal on a new car requires a ton of research. And the financing process took much longer than I had anticipated.

Luckily, I took the time out to call a relative that was much more seasoned than I was in this area. Not only did I save thousands of dollars, but I learned a ton about auto loans.

Here are some tips you want to consider prior to securing a loan for your new ride:

  1. Explore Your Options

There are two ways to finance your next car purchase.

Auto loan In India

Direct Lending

Under this arrangement, the loan is obtained directly from a financial institution or online lender, and the funds are distributed directly to the dealership at the time of purchase. The terms of the loan, including the interest rate and repayment period, are issued directly by the entity lending the funds.

According to the Federal Trade Commission (FTC), direct lending is a viable option because it grants you the flexibility to shop around for a lender with the most competitive financing terms and secure a pre-approval prior to searching for a vehicle. The latter is beneficial when determining your affordability since you are more likely to push the envelope when at the dealership.

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Dealership Financing

You also have the option of securing a Auto loan directly from the dealer. While doing so may limit your ability to explore several options, the financing terms may be negotiable. Furthermore, it may be a more feasible alternative if the dealer is offering specials on the vehicle you are considering for those using in-house financing.

  1. Research Current Loan Rates

Instead of taking the loan officer’s word for it, use auto loan tool to get an idea of the average interest rates being offered on the market and if they appear to be increasing or decreasing over time.

“If you are not in a super hurry to buy your car you might get a lower rate simply by waiting for the right time to take out a loan,” notes Carfax.

  1. Obtain Your Credit Report

In most instances, the most competitive financing terms for auto loans are given to the applicants with excellent credit. Stellar credit may also increase your bargaining power when negotiating the terms of an auto loan financing agreement.

Having less than perfect credit will not necessarily exclude you from qualifying for a loan, but it may force you to pay hundreds, if not thousands more on your next vehicle purchase.

Access your credit report for free at to confirm the accuracy and timeliness of the contents. Also, check your credit score since it is the figure that most lenders use to gauge your creditworthiness and determine what interest rate you qualify for.

“You want to check all three because you don’t know which one the lender will use and you want to give yourself time to fix any mistakes,” Gerri Detweiler, director of consumer education for, told CNBC.

  1. Consider New Models for Lower Rates

Dealership often offer zero-percent financing or an extremely low interest rate if you purchase a new model and secure your loan in-house. Consumers who chose to finance the purchase of a new model from a direct lending source have also received substantially lower interest rates than those who purchased used vehicles, notes

  1. Select a Brief Loan Term

While extending the loan term will yield a lower monthly payment, you may be subject to a higher interest rate that will cost you more over the life of the loan. Furthermore, there is always the possibility of owing substantially more than the car is worth once it is paid off.

  1. Speak With Your Financial Institution

Whether you are a member of a major bank or credit union, you should inquire about what loan options are available to you before applying. Reasoning: there may be more competitive loan products available to current members, but not advertised, than what is offered on the market. In addition, you may have better chances of securing a pre-approval if your credit is less than perfect than you would have elsewhere.

  1. Find a Co-Signer

If the potential lender perceives you as a high credit risk, you may be denied for financing. However, bringing a co-signer on board with a stronger credit profile will not only increase your chances of being approved, but possibly save you money with a lower interest rate.

  1. Confirm the Financing Offer Is Final

Surprisingly, it is possible for the dealership to let you drive off the lot with your new car without actually having the proceeds from the financing arrangement at their disposal. End result:

“You must return the car to the dealership, they say, or negotiate a new loan at a higher interest rate. If you don’t, you could lose your deposit and trade-in, and you may even be charged a rental fee for the time you had the vehicle. Faced with this situation, most people cave,” says CNBC.

However, this headache can be avoided when using dealership financing. At the time of the sale, request a confirmation that the financing is finalized or you could end up forking over a wad of cash to sort things out.

  1. Seal the Deal

Upon reaching an agreement with the lender or dealership, carefully review the contents of the contract and seek clarity to ensure you fully understand the financing arrangements before signing on the dotted line.


Should I Use a Credit Card to Pay off My Auto Loan

Paying off your car is a pretty big accomplishment – having the title in your hand and knowing that you own your vehicle free and clear can definitely make you feel a little lighter. This is why many of us go to great lengths to repay their car loans as soon as possible.

One way that some people go about paying off their auto debts is to pay off the loan balance with a credit card, then do a balance transfer of the loan to a 0% interest credit card. This way, the car loan is paid in full and they won’t have to pay an interest on the debt as they work to eliminate it.

This plan seems like a win-win, but should you try it for yourself? Be sure to read over the information below before deciding what’s right for you.

The unsecured vehicle

The first thing that’s important to understand is what you’re actually doing when you use a credit card to pay off a car loan. Simply put, you’re using an unsecured loan (the credit card) to repay a secured loan (the auto loan). If you’re not sure what this means, think of it this way: secured debts have some type of collateral that back them, like a car or a home. If you don’t make payments on these loans, the collateral could be taken by the lender. Unsecured debts – like credit cards and student loans – don’t have any type of collateral attached to them.

This means that by paying off a car loan with a credit card, you’re eliminating the possibility of having your car repossessed. However, keep in mind that your credit could be affected by this move. This is because if you’re paying off a auto loan with a credit card, you’re probably going to be putting a pretty huge balance onto the card while at the same time close out the auto loan. It’s likely that this will significantly bump up your total credit utilization, which will ding your credit score.

Lower rates – for now

One of the main reasons that people are attracted to the idea of using a 0% card to pay of their auto loans is that they’ll be able to repay the debt without incurring any interest charges. If the rate you’re paying on your auto loan is high, you could end up saving big bucks by moving the balance to a 0% card.

But again, this strategy could very easily blow up in your face. Balance transfers aren’t interest-free forever, and over thirty percent of people who do balance transfers don’t repay the loan before the 0% grace period is up. If you move your auto loan to a 0% card and can’t repay it before the interest-free window closes (usually 12-18 months), you could end up paying a much higher rate on your car debt than if you had just stuck with the auto loan in the first place.

Moving debts could mean big problems

Aside from some of the big pitfalls that come with transferring your car loan onto a credit card, if you’re considering this move it’s important to take a step back and reassess your financial situation. When people think about paying off loans with other loans, it’s usually a sign that they’re scraping around for cash that they don’t have.

If this sounds like you, forget about moving balances around and start taking steps to improve your financial standing. For instance:

Make a budget and stick to it – this way, repaying your debts will be easier

Track your spending – your budget will be most effective if you know where your money is going

Pay more than the minimums on your loans and credit card bills – this will get you to debt-free faster

The takeaway: paying off your car loan with a credit card might seem like a good idea, but given the risks involved, it’s probably not a worthwhile move. Instead, work on improving your financial situation so that you don’t have to deal with debt in the first place!


Benefits of Car Loan

Among many benefits, one of the benefits of car loan is to get your own four wheeler, which is a dream of most of the Indians who belong to the middle class family. The procedure to obtain a car loan is simplified and easy to understand as financiers are flexible with the minimum down payment requirement. The mechanism of car loan is simple and easy, where the financier pays majority of the amount of the price of the car and the customer pays the minimum amount as a down payment. The main reason customers today prefer the option of car loans over the traditional method of saving first is because the benefits of a car loan that come along.

Auto Loan.jpg

Open for all:

With the increasing competition between financiers, it has been of great benefits to the customers as the population eligible for a car loan has increased. People falling in the mid income group can also easily avail benefits of car loan from banks.

Simplified Method:

The procedure required for a customer to get a auto loan has been drastically simplified to attract more customers in taking car loans. The documentation and other paper work now take less than a day for approval.

Customize your EMI:

This is of great advantage for customers, as financiers give the liberty to the customers to decide their EMI’s as per their capacity. Though paying a bigger amount reduces the loan tenure.

Car loan allows a customer to approach a financier through dealerships, banks or credit unions, an online financial institute who pays the maximum amount of the value of the car which is later paid back by the customer in EMI’s along with a rate of interest. A car loan in India is the best alternative for people who cannot pay a large sum of money at one time to purchase a car.

The present running car loan interest rate in India is of 10.40 per cent that keeps fluctuating depending on the financier one is taking the loan from. It is important to explore your options before deciding your financier for a car loan.

Auto loan in India are very flexible. India is a country that has a population of all income groups with a maximum population in the mid income group. To get more customers, rate of interest of car loans are reduced for lower sections of society, and amount of EMI to be paid can be changed according to how much a person can afford with longer loan tenure. The process of getting auto loans are also faster and easier now and with basic documentation, anyone can have best car loan options.


How Difficult Is It to Get a Small Business Loan?

Bank lending to small businesses has declined terribly, especially since the big banks started eating up community lenders. Small business owners have an 80 percent probability of being denied funding. There are various factors to blame for the decline in small business loans, including increased regulation, a downturn in community banking, and the lower profit margins on smaller loans.

Below are three exercises – specifically designed for small business owners – that will ensure you join the ranks of the 20 percent that secure funding for their ventures.

Decide which type of small business loan is right for you

The purpose of the extra funding will dictate the type of small business loan you get. For example, you’ll want a short-term cash flow loan, a line of credit, or accounts receivable financing if you just need to manage day-to-day expenses. On the other hand, a term loan is better for growing your business by expanding to a new location.

You should also look at alternative sources, such as factoring and asset-based financing. The latter is similar to securing a conventional loan, where a moneylender will assess inventory values, accounts receivable, and fixed assets in order to establish whether or not you’re creditworthy. Based on their findings, they may issue you a line of credit. When companies use the factoring option, they sell their accounts receivable to get a short-term loan for up to 80 percent of the value.

Alternative lending has filled a gap left by risk-averse large banks. Alternative lenders tend to embrace technology, and sites such as Lendio are available to small businesses wishing to compare lending options. This is a boon for small businesses, as it offers transparency in what has traditionally been an opaque and confusing market.


Choose the right bank for your business

Choosing the right bank can be difficult when offerings for small business loans look so similar. If you already have a good relationship with your bank, that should be the first stop. Banks that know your backstory might better understand your needs.

Keep in mind that your first loan will often be the hardest one to secure. Banks prefer to fund businesses that they have lent money to at least once, and which have repaid at least one loan in a timely manner. Unlike venture capitalists or angel investors, banks tend to go after low-risk customers with proven ability to pay them back.

Lendio will instantly match you with the best lender for your business needs. Use Lendio’s tools to help you shop around before you start the lengthy application process. Be sure to compare interest rates, terms, and eligibility requirements.

Demonstrate why your business is a good investment

Pretending to be risk-free is a bad idea, but you should be clear about what the actual risks are. Show that your business is a good model, with an active target market. Your background, resume, business plan, and references should help you present yourself as one who will responsibly pay back a loan. Paying down your personal debt and getting your credit score as high as possible are also good ideas.

Many small business owners go into their loan interviews without pertinent documents, unable to explain the reason for their funding request, and generally showing that they lack confidence. You need to turn all of that around in your quest to demonstrate why your business is a good investment. You also need to know what you’re offering as collateral, and/or if you’re in a position to personally guarantee the loan.

As you prepare to speak to your bank of choice, keep in mind the ten common areas of focus that banks use to measure default risk:

  • Your industry
  • How long you’ve been in business
  • Your profitability
  • Your business model
  • Your credit history
  • Whether or not you’re willing to make a personal guarantee
  • Liens, lawsuits, and tax liability
  • Your equity in the business
  • Purpose of the loan
  • Concentration of your receivables


Car Loans

Being able to travel at godlike speed is nothing short of marvellous. Owning a car has moved from being a status symbol to being a necessity. It affords us time and comfort along with the luxury of spending time with our dear ones as we commute. While the demand for a personally owned car has increased, figuring out how you are going to finance a car is far more important. It is more important than finding the perfect car model.

Having the finance in place ensures you being ready when the right deal presents itself. It also increases your chances of cruising along the road that much quickly. Most banks, financial institutes, NBFCs or specialist car financing companies provide customers with a car loan. The idea is just as it sounds – loans given for the purchase of a car. You can get cars loans for both, new cars and used cars. There are also some car manufacturing companies with their own car financing firms that finance customers to buy their cars.


Pros of taking a car loan

  1. a) The lending institutes can provide you with a flexible contract term, ranging from 2 to 10 years. This can make it easy for you to manage your monthly finances while availing the benefits of owning a car.
  2. b) You can reduce the monthly installments by applying a residual to the loan.
  3. c) Lending institutes can give you a choice between fixed and variable rate of interest.
  4. d) You become eligible for tax deduction if your car is going to be used for business purposes.
  5. e) Usually, lower rates of interest are available as the loan is secured against the car.

 Applying for a car loan is very simple. There are a host of financial firms with web portals that provide handheld services beginning at assessing your eligibility, informing about the documents required and the application process, submitting or uploading the documents online, confidentially, and calculating EMIs for planning and management of your monthly finances. You simply have to log online to get all the car loan related information. Remember though, that even if the process for buying a new and a used car is quite similar, the rate of interest of used cars is much higher than new cars, making them a costly affair in the long run.

Whichever car loan you are considering, it is necessary to be aware of the following things:

Current financial status: If you have been careful with your budgeting, then you would probably be aware of the down payment you can make for the car, the amount of loan you require, and the EMIs post loan approval. However, for those who do not put a lot of thought into this matter, it is important to become aware of your monthly income, expenses and savings. Since your loan approval and rate of interest is dependent on your monthly income and credit score (discussed below), knowing your current financial status becomes crucial. It also prevents the agents from confusing you with complicated math and calculations and giving you a higher rate of interest. This will also ensure that you do not end up paying more rate of interest than the actual monetary worth of the car.

Credit score: Credit score is the rating you get from a Credit Information Company (CIC) based on your annual income, past loan repayments, and credit card statements. CIBIL (Credit Information Bureau India Limited) is one such institute that can help you access your credit score. A good credit score is essential to get a lower rate of interest and to get the loan sanctioned quicker.

Rate of interest: Banks and other lending institutes fix the rate of interest depending on the type of car and loan amount you are choosing. Interest rates are usually fixed for auto loan. Keep in mind that interest rate for a used car is about 20% higher.

Tenure: This means the duration for which you will be paying the EMIs, which includes the interest rate. It can range from 1 year up to 10 years. It is advisable to make a hefty down payment in order to lessen the loan repayment duration and avoid paying more than the car is worth. The maximum tenure for used cars is only 36 months, which puts higher EMI burden on the customer.

Car loans are secured.

In that, the banks or the financial institution approve your loan against the car that you are purchasing. Typically, a few delayed payments are allowed by incurring penalty fees. But if you consistently fail to make your monthly payments (EMIs), then the institutes, verbally and via written communication, request to begin payments immediately. If you still do not make the payments, the institutes have the right to repossess your car.

Documents required for applying for a car loan are as follows:

  1. a) Age proof
  2. b) ID proof
  3. c) Application form
  4. d) Photograph
  5. e) Residence proof
  6. f) Income proof
  7. g) Bank statements
  8. h) Signature verification proof
  9. i) Pro-forma Invoice or Rate List

Documents required after the car loan is sanctioned

Once the loan is sanctioned and before you receive the loan amount, you need to submit the following set of documents:

  1. a) Loan Agreement duly signed along with RTO set
  2. b) Standing Instruction (SI) Request / ECS Form / Post Date Cheques (PDCs). Security Cheques required for SI and ECS
  3. c) Margin money receipt

In conclusion:

  1. a) Have a good credit score
  2. b) Know your current financial status
  3. c) Pay a higher down payment to reduce the total cost incurred on your purchase, in the long run.
  4. d) Get car insurance
  5. e) Investigate a lot of banks and financial institutions for their processes and rates of interest before making a choice
  6. f) Avoid penalties by choosing institutes that allow flexible payment options. This means, you can pay a few months EMIs earlier than due without incurring additional costs.
  7. g) When buying a used car, it is a financially viable decision to make the full payment.