Used Cars and Bank Loans: What You Need to Know
Most people can’t afford to pay for any car up front, and so even getting a used car will probably require a bank loan. However, as with any financial product, used car loans can be confusing. The process that banks use to determine the cost of your loan, and whether or not you can even be approved for a loan can seem mysterious and arcane, leaving many consumers anxious about the state of their car loan. However, by breaking down the process and taking things step by step, it’s not that hard to understand the things you need to know about used cars and bank loans.
This guide will walk you through the steps of used car loans, and explain each one along the way so that you’re equipped with the information you need when you decide it’s time to buy a used car.
Step 1: Pre-Qualification
The first step in getting a loan for a used car is to see what kind of loans you might be able to get. This is done through a process called pre-qualification. While it’s not absolutely necessary to pre-qualify for your used car loan, it provides a number of advantages, so it’s a good idea to go through the process. To pre-qualify for a loan you can go to various lender’s websites and fill out the appropriate information. The lender will tell you approximate information about your loan, including the minimum and maximum loan value, and a range of interest rates. For some sites you can even give the VIN number of the car you want and they can give you an even more precise estimate.
The pre-qualification process will require you to share some basic information, like your income, residential status, the down payment you’ll be able to make, and other similar information. The lender will then use this information to estimate your loan terms. It is important to be as accurate as possible with the information you provide, otherwise you’ll be in for a shock later.
One of the best things about the pre-qualification process is that it doesn’t result in a credit check, so you can pre-qualify with a number of different lenders and compare the terms you’re offered to get the best loan possible. Also so banks offer a discount if you’re already a customer, so Capital One customers should look into a Capital One used car loan, State Employee’s Credit Union customers should look into a SECU used car loan, and Chase Bank customers should look into a chase used car loan, and use that information to get their Chase used car loan rates.
Step 2: Applying for a Used Car Loan
Once you’ve got an idea of what kind of loan you can get and find a used car that’s right for you, it’s time to apply for a used car loan. Bad credit can result in the interest rates for the loan being higher than you expect, so being honest and accurate during pre-qualifications is a good way to avoid surprises. If you are buying your used car from a dealership they will help you with the paperwork, otherwise you’ll have to fill out some forms yourself and wait on the results of the lender’s decision. Pre-qualifying can take a lot of stress and worry out of this process.
Step 3: Finalizing a Used Car Loan
When the lender gets back to you with your final loan terms and conditions you can agree to accept the loan. The bank will then provide the money to purchase the car. If you’re using a dealership the bank will send the money for the car directly to them, saving you a step. You’ll also have to make sure you meet all of the conditions of your used car loan. For example, nearly all used car loans require you to have comprehensive insurance for the length of the loan to protect both you and the bank in the event that your car is totaled in an accident.
As you can see, getting a used car loan is as easy as one-two-three. Understand the steps in the process, and make sure to take advantage of pre-qualification, and you’ll find yourself with the perfect used car and the best used car loan in no time.