The best car loans in the state of Texas have short loan terms and a very low interest rate. If you have a credit score of 660 or higher, you have a good chance of securing a favorable car loan.

Taking out a car loan can be a complicated process, especially if you aren’t familiar with the terminology that lenders use. If you take the time to better understand what goes into a car loan, you’re much more likely to come away with an affordable loan.

This guide compiled by the car insurance super app Jerry has everything you need to know to get started on securing your car loan in Texas.

How to get a car loan in Texas

There aren’t many people who can pay for a new car out of pocket, so the most common way to buy a car is to take out a loan. With a car loan, you’re able to pay off new vehicles over several monthly payments, rather than doing so all at once.

Most people take out a car loan at a bank, although other places such as dealerships can also provide car loans. When you go to take out a car loan in Texas, here is what you can expect:

You’ll first need to make a down payment. In other words, you’ll pay a certain percentage of the car’s value up front. Usually, you can expect to pay between 10-20% of the car’s value.
You’ll negotiate with the lender to determine a loan term. This is simply the duration of time that you’ll make monthly payments.
You and the lender will settle on an interest rate for the loan. This rate is generally based on your credit score, as well as the car you’re looking to buy.

After all of this is settled, you’ll begin making monthly payments on your loan. Your monthly interest rate will be based on your annual percentage rate (APR).

The table below can help give you an idea of what your monthly payments would look like for a car loan based on your APR.

Credit Rating

Car Make	Average Annual Interest Rate	Average Monthly Payment

If you’re looking to get started finding a car loan in Texas, here are some tips you need to keep in mind. MORE: How to reduce car payments without refinancing your car loan

Check your credit

The first thing you should do if you’re looking to secure a car loan in Texas is to check your credit rating. The interest rate a lender offers you is, for the most part, based on your credit. If your credit is too low, you may be unable to find a willing lender at all.

A credit score of 660 or higher will help you to qualify for a loan with a good interest rate. If you have a score of 700 or higher, your interest rate could be as low as 3%. If you’re more like the average buyer, your interest rate will be in the neighborhood of 5%.

Below you can find a table that shows an estimate for what your monthly payments would be based on your credit:

Credit Rating

Loan Terms	Average Annual Interest Rate	Average Monthly Payment

Compare lenders

It might seem appealing to take the first loan that you’re offered just so that you can move the process along, but you should always compare lenders. Even if the dealership you’re buying from offers to take care of the loan for you, you should decline until you’ve compared your options.

A good general ground rule is that you should compare at least three lenders before committing to a loan. You can take things such as customer service into account, but you’ll mostly want to look out for the best interest rate.

MORE: How to find out if a used car has a lien

Choose your loan term

One component of your car loan you’ll have a lot of power in determining is your loan term. This is essentially the number of months that you will be making payments for. On average, car loans range from 60 months to 72 months.

If you want to spend as little as possible, a shorter loan term is always better. Although the individual payments you have to make may be larger, it’s still going to save you in the long run.

Longer loan terms are more expensive because every month you have to pay whatever your set interest rate is. If there are more months, there are more chances for interest payments to stack up. If possible, you should always choose a loan term of 60 months or less.

Here is a look at how your APR and monthly payments could change based on your loan term.

Credit Rating	Average Annual Interest Rate	Average Monthly Payment

Get preapproved

If you can, you should always get preapproved for a car loan. This just means that a lender has provided you with an estimate for the interest rate and the total amount you will receive.

Being preapproved is a major advantage when it comes to buying the car you want. Since you have a better understanding of your finances, you’ll have more power when you’re negotiating with a dealership.

Can you get a car loan in Texas for a used car?

Yes, most banks will provide you with a loan for a used car. There are a few things you need to look out for, however:

Car loans for used cars usually have very high interest rates—expect a rate of around 8%
Some banks have minimums for car loans, and if you’re buying a cheap car you might not qualify—you may need to visit a credit union instead
Many lenders have an age limit for cars they will provide loans for, so you may have trouble finding a lender if you’re buying a vintage car or anything older than 10 years If you are wondering how the age of a car could affect your loan, the table below will help.

Car Make

Car Year	Average Annual Interest Rate	Average Monthly Payment

MORE: What is a prepayment penalty on your car loan?

Texas car loan calculator

There is a lot that goes into determining the specifics of a car loan, such as your credit score and the age of the car you want to buy. Jerry’s car loan calculator takes all of those variables into account, and by using it you can find an estimate for your next car loan.

Keep in mind that, since the calculator is based on averages in Texas, these aren’t the same numbers that a lender might present to you. You can still make use of these numbers as a tool when you do decide to go and negotiate with a lender.

Car Make

Credit Rating

Loan Terms

Loan Amount

Average Annual Interest Rate	Average Monthly Payment

How to find affordable car insurance in Texas

Once you’re able to buy your new car, you’ll need to make sure it’s insured before driving it off the lot. The process of securing a car loan may be stressful, but buying car insurance can be made simple and easy thanks to Jerry.

Jerry is a car insurance comparison app that will allow you to find affordable quotes from over 50 of the top insurers in the country. Once you find a plan you like, Jerry’s team of agents will take care of all of the paperwork and phone calls to get you set up.

Signing up with Jerry takes just seconds, and the average Jerry user saves $887 per year on car insurance payments.

“I had a great experience using Jerry for the first time. Once my boyfriend buys his new car, we’ll use Jerry together to make sure he doesn’t end up overpaying on new insurance!” —Stephanie S.

FAQs

What credit score is needed to buy a car in Texas?

If you have a credit score of 660 or higher, you’ll be able to qualify for a loan with a good interest rate. It may be difficult to find a lender willing to work with you if you have a credit score lower than that, and those that are will likely offer high interest rates.

Will a bank give me a loan for a used car?

Most banks will give you a car loan to buy a used car, albeit with a high interest rate. If you’re purchasing a very cheap used car, you may be better off working with a credit union.