How does getting a car loan from your bank work?
My old car was finally ready to be retired, and I’m now in the market to purchase a new vehicle. I know I’ll need to take out a car loan, but how does getting a car loan from your bank work?
Shopping for a new car can be exciting, but getting a car loan can undoubtedly be a bit confusing.
In general, getting a car loan from your bank works by you applying asking the bank to supply the total cost of a vehicle upfront with the understanding that you will repay the loan over a set period in the form of monthly payments, plus interest.
Before the bank approves your application, they will look at many factors to determine how much they are willing to offer and the interest rate. Some of these factors include:
- Credit score and history
- Debt to income ratio
- Liquid assets
- Size of the down payment
- Loan term length
- Employment history
- Value of the vehicle
The bank will own the car and hold the title until the loan is completely paid off. And the bank can repossess the vehicle if you fall behind on payments, so only taking out what you can afford is crucial.
To make shopping for your new easier, you should consider getting preapproved for a loan to find out the rate offered. This will give you a better idea of your budget and make it easier for lenders to officially approve you. Afterward, you will then submit a complete application once you have found the car you want.
Before the bank writes a check for your new vehicle, you will also need to provide proof of insurance with comprehensive and collision coverage on the policy.
If you want to ensure you aren’t overpaying for your coverage, use Jerry, an insurance comparison app that shops for low prices with over 50 different insurance companies for free. You will get quotes in seconds, can make changes at any time, and if you ever have any questions, agents are just a text away!
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