You’ve got your eye on a shiny new (or new-to-you) car or truck. But if you’re like most people, you don’t have enough cash on hand to buy it outright and need to finance it with a loan.
How Auto Loans Work
When you borrow money to buy a car, you’ll pay it back monthly plus interest and fees. The lender will own the title until the loan is paid off. They can also repossess the car if payments aren’t made.
How Much Do Auto Loans Cost?
The amount you’ll pay each month depends on:
- The total amount of your auto loan
- How long the loan is for (number of years)
- Annual percentage rate (APR), which includes interest and fees
You can reduce the amount you’ll owe by:
- Increasing your down payment
- Trading in an old car, with its value going toward your down payment
- Improving your credit score to lower your APR
A great way to increase your down payment is to make “monthly payments” to your savings account before you take out an auto loan. Once you pay off your loan, you can use the same strategy to save for the next down payment—and so on.
Your APR will be based on:
- Your credit score
- Whether you’re buying a new or used car
- The length of your loan
The longer your loan, the lower the monthly payments will be. The trade-off is you’ll end up paying more in monthly interest and fees.
Auto Loan Steps
The auto loan process is typically quick and straightforward. Your lender will check your credit history and review your income and expenses.
You’ll need to have these items on hand:
- Driver’s license information
- Pay stubs
- Social Security Number
At United, we offer competitive rates and flexible terms on auto loans. Check out our car loan calculator to see what your payments might look like. Then get in touch with one of our loan experts to explore your options.