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What Should I Know About Getting a Used Car Loan?

Article Details
  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Images By: Sachin Agarwal, Michael Shake, Auremar, Phrysphotos
  • Last Modified Date: 02 December 2016
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Getting a used car loan is a little different than obtaining a loan for a new car. Other factors besides credit can be taken into account like the age of the car and its present value. Most large banks generally won’t make loans for cars that are over about five years old, but sometimes a bank will give a loan that can cover the cost of inexpensive older cars. These loans may not be secured though and may have a higher interest rate.

Companies that sell used cars may have a contract with a few lenders that regularly make loans, but these may not always offer the best interest rates. Standard recommendation is that people apply for online car loans as a means of finding the best rate. This should be pursued with caution, and people should check up on the reputable status of each lender prior to applying. People who belong to a credit union may also find better than average rates there for a used car loan, and this may be an avenue worth exploring.

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Sometimes it’s possible to get a used car loan for a prime interest rate, especially online and if credit is excellent. Excellent credit usually means having a credit score of 680-700 or higher and having an established means of paying back loans. Those who have credit problems can still get a used car loan, but they will have to do more searching to find one. Some online companies will only work with people with very good to excellent credit, while others that specialize in bad credit loans may be able to help. They do so at the additional cost to the borrower who will pay much more in interest rates to purchase a car, used or new.

Another thing that may be a consideration with lenders is price of the car. It usually has to be reasonably priced and fall into the Kelley Blue Book range for age, mileage and condition of the car. Loans may not be offered if the car far exceeds this range, though there are exceptions. Some lenders will loan extra money to pay for things like extended warranties or service contracts.

There are some used car dealers that specialize in bad credit lending, and people really need to make sure they spend time comparing available online rates before they agree to a used car loan with one of these dealers. Interest rates can be extremely high and may not be competitive with interest rates available elsewhere. Even with poor credit, shopping around is always smart.

When people get a used car loan, they don’t have to necessarily retain it if they can find a better deal. A lot of lenders are interested in refinancing loans, especially in the first few months of the loan. If customers make an impulse buy they can still search for better loans after the purchase and after a loan has been obtained elsewhere. This may save a little money.

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Discuss this Article

Feryll
Post 3

@Laotionne - This article mentions how credit unions are good about making used car loans for their customers. This is one of the reasons I left my old bank and started banking with a credit union. They will work with you in ways that most banks will not.

Drentel
Post 2

@Laotionne - I don't know what your personal issues are that are making getting the used car loan more difficult, but I have an employee who had gone through a divorce and in the process he and his ex-wife had ruined his credit. Even though he had a good steady job and was earning a good income, none of the local banks or lenders were willing to take a chance and give him a car loan.

He is a good worker. He shows up on time, works overtime without complaining and he does good work. I knew he needed a car to get back and forth to work, so I called him into the office one day and told him

that I would cosign at the local bank where I bank so he could get a loan and buy a used car.

We went to the bank and got the loan with no problem. That was several years ago and he paid the loan off ahead of time. Now he does his banking at the same bank and if he ever wants another car loan they will help him get the loan without me cosigning because he paid off the first loan without any late payments.

Laotionne
Post 1

I am trying to get another car because mine has seen better days. I could get a new one financed through the manufacture's financing company without too much difficulty, but I want a used one so I don't have to spend as much money and so my monthly payments are not as high as they will be with a new car.

The car lot where I want to buy the car doesn't provide used car loans, so finding a way to get the car is turning out to be a challenge. If all else fails then I will simply buy a new car and pay more over the period of the loan than I want, but I should be able to afford the monthly payments either way.

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