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How does getting a car loan work?
I'm a first-time car buyer who wants to finance a vehicle, but I have no idea where to start. How does a car loan work? How do I get one?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you’ve never had a
car loan
, feeling a bit overwhelmed about the process is perfectly normal. And it’s far more intelligent to ask questions ahead of time than to idly sign things you don’t understand.A car loan works like this: a lender gives you the money to purchase a vehicle and then you pay the amount back over a certain period of time with interest added on to the initial amount you borrowed.
Whether or not you’re approved for the loan, as well as the interest rate and loan terms you’re offered, are dependent on several factors, including:
- Your credit score and credit history
- Your income and debt-to-income ratio
- The length of the car loan
You may choose a loan payback duration as short as 12 months or as long as 84 months—whatever works best for you. The shorter the loan, the higher your monthly payments, but the less you’ll pay in interest. And the longer the loan, the less you’ll pay each month, but the more you’ll pay in interest.
If you get approved for a car loan, note that you will also need
full coverage car insurance
. Download the Jerry
app to compare competitive quotes from top insurers and get the best rate for your car insurance needs.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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