A car loan is a contract between a car buyer and a financing entity. In this relationship, the financing entity, sometimes a bank, credit union, or finance company, takes ownership and title to the car or places a lien on the car (depending on the state). The buyer usually makes a down payment, followed by monthly installments until the contract is fulfilled or paid off. The financing entity then transfers ownership to the car buyer or releases the lien, and the car buyer becomes the car’s legal owner. Car loans almost always include interest.
You typically apply through your bank or credit union to get a car loan. However, you may also be able to apply directly through the auto dealership. Several factors influence the quality of a car loan. These include your credit history, income level, debt load, and the amount of the loan you require. Better credit means, as a rule, that your interest rates will be lower. Your current income level could influence the amount you can borrow and the monthly period over which you are expected to repay the loan.
Kelley Blue Book’s Auto Navigator helps you pre-qualify for a car loan, which can alleviate some of the financial stress of buying your next vehicle.
