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An In-Depth Wells Fargo Auto Loans Review: What You Need To Know

Taking out a car loan comes with making important decisions. That is why this Wells Fargo auto loans review will provide you some essential details that you must know and should carefully consider before signing any car loan document from the company.

Wells Fargo Auto Loans Review

Based on an Experian study published in March 2020, the American people do already have an existing $1.3 trillion in auto loan debt as of 2019, which is an 81% increase as compared to how much it was back in 2009.

Furthermore, to date, Americans owe more by average as compared to a decade ago. In fact, the average debt is $19,231 already, which has increased by 25% from 2009 as well.

Meanwhile, according to a study by the Federal Reserve, around 35% of American adults rely on an auto loan to pay for car purchases in the same year.

Although the increase of the number of American people taking out a car loan seems to continue this year and the years to come, according to a Finder article, “the percentage of Americans with car loans has actually decreased over the past few years.

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Nevertheless, one thing’s for sure – Americans do get auto loans to be able to purchase vehicles that they have been eyeing for.

Now, similar to any other loans out there, there are a lot of lending companies or financial institutions that provide auto loans. In fact, the industry is pretty much competitive.

Among the financial institutions that offer auto loans is Wells Fargo. Yes, it is one of the very well-known banks in the country.

But just like what we always say whenever we make reviews, as borrowers, we owe it to ourselves to research before we deal with any lending company or financial institution. It is our responsibility to know the details and be informed to avoid regretting it in the end.

Having said that, in this Wells Fargo auto loans review, we are going to provide you some if not most of the details that we though borrowers need to know before signing any auto loan document from the said financial institution.

In particular, we are going to provide you answers to the following – most commonly asked – questions:

  • What is Wells Fargo?
  • What auto loan products do Wells Fargo offer?
  • What do borrowers need to know about Wells Fargo auto loans?
  • Who qualifies for a Wells Fargo auto loan?
  • How to apply for a Wells Fargo auto loan?
  • What are the pros and cons of Wells Fargo auto loans?

WHAT IS WELLS FARGO?

Wells Fargo and Company or simply known as Wells Fargo is an American multinational financial services company.

While it is headquartered in San Francisco, California, the company does have central offices across the United States.

Based on its market capitalization, Wells Fargo is the world’s fourth-largest bank. More so, it is ranked as the fourth-largest bank in the US based on total assets.

As earlier mentioned, Wells Fargo is a multinational financial services company. It particularly engages in banking, investments, insurance, mortgage, as well as consumer and commercial finance.

Furthermore, the financial institution operates through various segments, which include Wholesale Banking, Community Banking, as well as Wealth and Investment Management, and many more.

The Community Banking segment in particular offers a complete line of financial products for both individual consumers and small businesses, which include checking and savings accounts, credit and debit cards, as well as student, small business, and automobile lending. The latter being our highlight in this review.

By the way, recently, the bank was involved in an auto insurance scandal, which in a way tarnished the bank’s reputation.

If you want to know more about it, and how the company managed such a challenge in their business, watch the video below by The Young Turks:

WHAT AUTO LOAN PRODUCTS DO WELL FARGO OFFER?

Wells Fargo is definitely one of the biggest rather largest auto lenders in the country today.

But although it is known to have a really good reputation when it comes to the products and services it provides, as borrowers, it is important that you still look into the details — in this case, about what particular auto loan products does the company provides.

First and foremost, it is important to take note that starting annual percentage rates (APR) will be based on the lender’s credit scores and the amount of income and debt he or she has.

Wells Fargo offers a variety of auto loan products, which include the following:

  • New Car Financing – This product is available for those who want to buy a new car directly from a dealer. Generally speaking, this does have a fairly low starting APR — somewhere around 4%.
  • Used Car Financing – This product is ideal for people who are either planning on buying a used car from a dealer, or those who are opting to buy from a private car seller. If you choose to buy from a private seller, the ARS is usually around 7%.
  • Lease Buyout Financing – This product is applicable to those who leased a car and eventually decide to keep it by the end of the lease term. If you opt to buy the car instead, the APR usually are close to 4.5%

While it does offer a good variety of auto loan products, unfortunately, Wells Fargo does not offer auto loan refinancing for borrowers who have an existing car loan but are not satisfied with their current rate.

You see, based on the firm’s list of auto loan products, as a car buyer or as a borrower, you really also need to take time to consider what kind of product you will go for. If we are going to base it on APR though, buying a new car does have better rates. But again, the final rates will depend on your qualification, particularly, your creditworthiness.

So, the better your credit score is, the more likely you are to get better rates.

WHAT DO BORROWERS NEED TO KNOW ABOUT WELLS FARGO AUTO LOANS?

As we mentioned earlier, this Wells Fargo auto loans review will provide you with important details you need to know before applying for an auto loan from the firm.

Apart from APR, there is actually more information that you, as a borrower needs to know to avoid confusion or worse, regretting the decision you made.

In particular, we are going to provide you information on the following:

  • Loan Amounts
  • Interest Rates
  • Loan Terms
  • Fees and Penalties
  • Discounts
  • Disbursement of Funds
  • Limitations
  • Other Information

Now, let’s get to it one by one —

Loan Amounts

While it is important to have a specific amount in your head, it is also important to consider the loan amounts offered by the lending company or financial institution you are looking for. By doing so, it helps you reconsider your options, or you can stick to it and just specifically look for a lender that could cater to your needs.

At Wells Fargo, it is important to note that the funding a borrower gets from an auto loan depends on a number of factors including credit score, credit history, as well as the type of car the borrower is eyeing for.

Wells Fargo, however, provides funding that starts from $5,000 and without an upper limit. Please take note, though, that the amount borrowed will depend also on the state you are from.

But technically, compared to other lenders, Wells Fargo definitely has one of the best and most flexible loan amounts.

Interest Rates

Another important thing to factor in when looking for an auto lender is the interest rate. Every lender does have their own rates and qualifications on specific rates.

However, as a general rule, people with high credit scores usually end up having the best rates possible. Meanwhile, borrowers with fair or poor credit score get a higher interest rate.

The company’s auto loan rates usually range from 0% to 11%, with an average of 4.99%. But for your reference, here’s what APR you can expect based on auto loan type:

  • New Car Financing – around 4%
  • Used Car Financing – around 7%
  • Lease Buyout Financing – around 4.5%

Again, as mentioned, the final APR will depend on several factors especially your credit score. Thus, we highly recommend working on having a high or excellent credit score to be able to take advantage of lower rates and other perks.

Loan Terms

Loan terms refer to the length of time you are going to repay the loan. It’s definitely another factor to consider when taking out a loan as you need to gauge if you are able to pay off the loan based on agreed terms.

As compared to other lenders with a lot of loan term options, some even offer long repayment periods, with Wells Fargo, the firm’s auto loans do only offer repayment periods between 60 months and 75 months (average).           

So, if you are looking at repaying on a longer-term, you may then consider other lending companies instead.

By the way, it is important also to keep in mind that if you will opt for long repayment terms, this could probably lead to paying more in interest over the life of the loan as compared to paying it off in a shorter period of time.

Fees and Penalties

Apart from APR, another money-related factor to consider when taking out a loan, or in this case, an auto loan, is fees and penalties.

Although Wells Fargo does not charge early payment fees, which means a borrower can repay the loan any time before it is due without having to worry about such charges, Wells Fargo borrowers could run into potential late fees and a credit score impact if they make a late payment.

In addition, a borrower may have to pay additional charges in specific states because of insufficient funding in his or her account.

Currently, the company decided to halt lending money to most independent car dealerships because of the financial fallout brought by the current COVID-19 pandemic. Just so you know if you are intending to get into this.

Discounts

Being one of the country’s largest auto lenders, it is not surprising that Wells Fargo offers perks.

In particular, the firm offers discounts to borrowers who are already Wells Fargo customers, as well as those in the military.

Disbursement of Funds

If you need quick credit decisions, and fast funding (in as soon as same-day), then Wells Fargo may just be the right match for you.

Yes, the firm could provide you with the amount you need as soon as the same day you applied for an auto loan — provided, of course, you pass all the requirements and qualifications.

Limitations

While some auto lenders may provide funds for any type of vehicle, with Wells Fargo, there are some limitations.

There are certain vehicles that are not eligible for Wells Fargo financing. This includes large commercial-type vehicles (like dump trucks) as well as vehicles that auto manufacturers have already discontinued.

This is very important also when taking out an auto loan. Make sure that the vehicle you are purchasing is eligible for the lender’s auto loan products.

Other Information

Apart from the details and/or information we have already mentioned, Wells Fargo also has another feature that borrowers must look into.

Unlike other auto lenders, the firm allows borrowers to change the due date on your payment loan once over the entire period of the loan. This may come very handy if a borrower fell short on cash one month or that he or she wants to line up the car loan payment due date with his or her paycheck schedule.

To be fair, this kind of feature is not that common among lenders, so, it’s nice to take advantage of it if the need arises.

WHO QUALIFIES FOR A WELLS FARGO AUTO LOAN?

As part of this Wells Fargo auto loans review, we are also going to provide you what you need to be able to borrow money from the firm.

First off, you have to have fair to excellent credit score. Based on Wells Fargo’s Q1 2020 quarterly report, during the first quarter of the year, nearly 34% of auto loans issued by it went to borrowers with FICO scores under 680.

So, if your credit score is somewhere around that, there is a chance that you can also get approved for an auto loan.

Apart from the FICO score, auto loan borrowers must also present a copy of the following financial documents during the application process:

  • Social security number
  • Previous and current residential addresses
  • Employment history and status of current employment
  • Proof of income
  • A statement that details your rent or mortgage payments on your home or apartment

In addition, you will also need to provide details on the vehicle you intend to apply for an auto loan. Details such as the following:

  • VIN
  • Year
  • Make
  • Model
  • Mileage

Similar to other types of loans, when applying for a Wells Fargo auto loan, make sure you are:

  • A U.S. citizen or a permanent resident card holder
  • At least 18 years old (or 19 years old depending on the state)
  • Employed or are self-employed

HOW TO APPLY FOR A WELLS FARGO AUTO LOAN?

At the moment, the only way to apply for a Wells Fargo auto loan is by filling out a credit application with a dealer within the firm’s network. Currently, Wells Fargo does have 11,000 partner dealerships.

Unfortunately, though, a list of their network of dealers is not available on their website, which means borrowers need to call and ask dealers directly if they work with Wells Fargo.

Once you found a dealer that is within the firm’s network, you will then have to fill in an application form that dealers send over to Wells Fargo underwriter for assessment and approval.

It is important to take note that Wells Fargo conducts a hard credit check, which may affect your credit score.

Once approval is granted, expect funding in as soon as the same day as the auto loan application.

WHAT ARE THE PROS AND CONS OF WELLS FARGO AUTO LOANS?

To sum up this Wells Fargo auto loans review, at the same time, to help you make an informed decision, we are also listing down the things that we like and the things that we do not like about Wells Fargo auto loans.

As you know, while the firm has its share of good things, like any other lenders out there, it does have its share of flaws as well. As borrowers, it is important to know it all so you get to consider them when making a decision.

Anyway, here’s our list of pros and cons for your reference:

PROS

  • Wells Fargo does have better rates as compared to other auto lenders out there.
  • The firm can fund your up to 100% of the amount of the vehicle you are purchasing.
  • Fees are included in your monthly payments instead of charging them upfront.
  • Wells Fargo auto loans do not require down payment.
  • It offers discounts to Wells Fargo customers availing an auto loan, as well as those working in the military.
  • It does not have a minimum credit score requirement, which makes it appealing to all types of customers.

CONS

  • You need to go through a dealership within its network in order to avail of a Wells Fargo auto loan.
  • The company website is not as informative as other websites — it does not include a list of partner dealerships.
  • Wells Fargo does not offer a refinancing option.
  • Wells Fargo auto loans are only available for up to 75 months.
  • The company, unfortunately, has been involved in a recent auto insurance scandal that may deter customers from using the bank’s auto loan products.

FINAL THOUGHTS ON WELLS FARGO AUTO LOANS

Wells Fargo may have its share of highs, but, it sure does have its lows as well, which is not surprising. After all, there’s no such thing as a perfect company or auto lender for this matter.

Given all the facts we share, are you considering taking out an auto loan at Wells Fargo?

We do hope that through this Wells Fargo auto loans review, we were able to provide you with all the information you need in order to come up with the right decision.

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7 Ways On How To Pay Off Your Car Loan Early

There are plenty of ways out there on how to pay off your car loan early, and we are going to share with you some of them. This way, you’ll have an idea of how to be debt-free sooner than you can.

ways on how to pay off your car loan early

According to the United States Consumer Financial Protection Bureau, as of April 2019, there are 2.3 million auto loans that were originated, while $52.3 billion volume of new loans were recorded at the same time. Based on this data, the bureau found that there is a 3.6% increase in year-over-year originations, 2.1% in year-over-year inquiries, as well as a 1.9% decrease in year-over-year credit tightness.

Meanwhile, in data presented by Statista, it says that as of May 27, 2020, the car loan interest rates in the United States amounts to 4.35%. Furthermore, in the same report, it says that the “average amount of new car financing in the U.S. was 32,797 U.S. dollars at the end of the fourth quarter of 2019.”

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If you come to think of it, based on the numbers, Americans love cars, and most of them, get an auto loan to be able to purchase their dream car.

If you have had an auto loan before, you probably know by now that financial institutions offer different terms and rates that are really pleasing to consumers.

But the thing is, some of us are not that fully aware of how car loans go. Just so you know, the common rule when it comes to an auto loan (or any type of loan for that matter) is that the longer you pay for a loan, the expensive the loan becomes. Meanwhile, the shorter the car loan is, the cheaper the car loan interest rates are or that the loan in itself is cheaper.

So, ideally, when you have an auto loan, it’s best to pay as soon as possible. That way, you get to save yourself a few bucks.

Having said that, we are going to share with you some ways on how to pay off your car loan early.

In particular, we are going to talk about the following:

  • What are the pros and cons of paying off an auto loan early?
  • What are the steps to paying off an auto loan early?
  • How to pay off your car loan early?
  • What to do if you have more than one car to pay off?

WHAT ARE THE PROS AND CONS OF PAYING OFF A CAR LOAN EARLY?

Before we talk about the process on how to pay off your car loan early, we thought it’s important also to share with you first the benefits as well as the downsides of paying off your car loan early.

As a consumer, you have to understand and be fully knowledgeable about this so you know your options, at the same time, you will be able to decide what will work for you best.

So, having said that, let’s take a look at the pros and cons of paying off a car loan early:

PROS

  • You get to eliminate debt sooner. Paying off your car loan early helps decrease your monthly expenses, which means you get to save money, at the same time, you get to focus on paying other debt you have faster as well.
  • You get to enjoy a reduced interest rate. Normally, the interest of a loan accumulates over the life span of a loan. Thus, paying off your car loan early will help reduce the total amount of interest you pay from your creditor. This also means you get to save money for yourself or for other things you need to pay off.
  • The lien of your car will be automatically removed. According to Investopedia, lien refers to a creditor’s legal right to “sell the collateral property of a debtor who fails to meet the obligations of paying off a loan.” Unlike personal loans, car loans are secured loans, which means the car automatically becomes the collateral. Should you fail to meet your financial obligations to the lender, the lender has all the right to take the car away from you. However, when you pay off the loan early, the lien is automatically removed and you will have all the rights to your car.
  • You get to have an improved debt-to-income ratio. A good debt-to-income ratio is vital particularly when buying a house. Mortgage companies usually look at it to help ensure that you can afford to pay off for the mortgage. By paying off your car loan early, it puts you in a better financial position and definitely helps improve your debt-to-income ratio.
  • It gives a positive impact on your credit score eventually. We all know how important it is to have a good credit score, right? So, if you want to improve rather than increase your credit score, we highly recommend paying off your car loan early.

In the video below by Brad Finn, he shares tips as well as benefits of paying off your car loan early. Just click the play button to watch the whole thing:

CONS

  • You may be charged for early payoff penalties. Unfortunately, some financial institutions or lenders charge an early payoff penalty, which means you are charged for paying off the loan early instead of its supposed maturity date or original payment schedule. That is why we highly recommend that before you even apply for a car loan, make sure to check with the lending company if they charge early payment penalties. If yes, consider checking out other lending companies.
  • There may be a need to refinance your car. Not all lending companies allow penalty-free early payoffs or partial payments towards a car loan or any loan for that matter. So, to be able to get terms that make paying off worthwhile, you may consider refinancing your car loan instead. Later on, we’ll talk more about refinancing your car loan.
  • The total loan balance may stay as it is. There are lending institutions that use pre-computed interest, which means all of the interest for the whole duration of the loan is tallied and applied to your account even before you make the first payment. In this particular kind of arrangement, lenders normally apply whatever extra payments to pay down the interest first. Thus, paying your loan off early may mean not saving money at all. Again, better check this with your lender to be sure.
  • There is a chance that your credit score may drop. Although we earlier mentioned that your credit score may improve when paying off the loan early, during the first few months, it actually may drop. But as we have said, it will eventually recover and may even improve your credit score.

WHAT ARE THE STEPS TO PAYING OFF A CAR LOAN EARLY?

As we have mentioned earlier, car loans are secured loans, which means your car automatically becomes the collateral should you fail to make on-time payments. Now, when paying off a car loan early, it involves more than just submitting your payment. You need to take certain steps to ensure that everything is properly documented and that all rights to your car are yours.

So, to help you with that, here’s a step-by-step guide on how to pay off your car loan early:

1. Make a call to your lender, and request a payoff balance. Do not forget to ask how long the payoff balance is valid. Usually, the interest accumulates daily on the loan. So, make sure to ask and take note of the validity period.

2. Pay for the exact payoff balance to the lending company. When paying off, you can either pay the balance in-person or pay it off via online transaction or online payment. Once payment is made, make sure to take note of the processing date. Also, double-check to ensure that you made the payment before the validity of the payoff balance provided by the lender expires. Meanwhile, if you are mailing the payment, make sure to verify the delivery date to ensure that it arrives before the payoff balance’s expiration date.

3. Once payment is received and processed by the lender, request for a release of lien. This especially applies to those paying payoff balances online or via mail. Make sure to check if the payment has been received and processed. Once the lender makes a confirmation, immediately request for release of lien on your vehicle. Do not forget to request for a completed loan payoff letter as well.

4. Once the release of the lien of your car is received, take your car title, loan payoff letter, and release of lien to your local Department of Motor Vehicles. Then, request a new title that officially removes the lien to make sure all the rights to the car is yours already.

5. Make sure to keep copies of all the paperwork for your records, and for future reference. Even after you paid off the loan, it is important to keep copies of all your records. No one knows what you might encounter in the future, so, better be safe than sorry.

HOW TO PAY OFF YOUR CAR LOAN EARLY?

As we have mentioned earlier, there are plenty of ways on how you can pay off your car loan early.

If you do not have a lump sum to pay off your loan, here are some ways you can do to help expedite paying off your car loan:

Refinance Your Car Loan

Did your credit score improve since you bought that vehicle? If yes, then refinancing should not be a problem. Usually, if you had been paying all payments on-time for a year or two, most likely your credit score has already improved.

Now, when refinancing your car loan, make sure to opt refinancing at a lower rate. This is an effective way to pay off your car loan sooner than expected.

By lowering your interest rate, your monthly payments will be slightly reduced. Now, if you are able to pay more than the monthly payment, then, you are on your way to reducing your debt.

There are key points to remember though when refinancing a car loan. These are:

  • Knowing your interest rate
  • Finding a lower rate either at a bank, credit union, or online
  • Financing for a lower rate, at the same time, a shorter term

Keep in mind that you are trying to pay off the loan sooner. Thus, reducing your interest rate means you are going to pay less all in all. But, take note that it does not necessarily mean you are paying it off quickly if you opt for a long term loan.

When refinancing, make sure that it will be beneficial and not like an extra load you need to think of. Make sure that it will help lessen the load of paying the debt.

What are the benefits of refinancing?

To put it simply, refinancing can help lower your interest rate, which gives you an alternative way to save money over the course of your car loan.

Refinancing is also another way to get rid of bad customer service you get from your current lender.

Just remember though that if you opt for refinancing, most lenders will not refinance a car that’s over seven years old, which means, you should process refinancing as soon as you can or before your car turns seven years old.

Pay the Car Loan Bi-Weekly

Instead of paying once a month, consider taking your monthly car payment, and then divide it by two. Once done, make that payment amount every two weeks.

If you come to think of it, if you pay every two weeks, it means you make 50% of your payment 26 times as compared to a usual 12 payments annually. Essentially, it means paying an extra payment in its entirety per year.

Apart from that, one more benefit you get from paying on a bi-weekly basis is that you will pay less interest over the course of the car loan. When you pay every two weeks, your balance continuously decreases, which leads to a lessening the amount of interest charged against your remaining balance as opposed to paying once every month.

This step may not help you pay off your loan very quickly, but it is still good to get into the habit of paying your loan off regularly.

Use Your Tax Refunds, Bonuses, and Pay Raises

Instead of using your tax refunds, bonuses, and pay raises to shop or for other non-essential things, why not use them to help pay off your car loan early instead?

Whatever extra money you get in a month or in a year, make sure to put it directly towards your car loan. You will be surprised at how big a difference it can make. You will just realize you actually have enough money to pay off your car loan.

Get an Extra Job

Another way to help you pay off your car loan sooner is by getting an extra job.

There are so many online jobs out there that can add your monthly earnings, and would definitely help you gather the money you need to pay off your car loan earlier than scheduled.

Round-Up

Instead of paying the agreed amount between you and your lender, make round payments instead of up to the nearest $50 to help repay the loan faster.

For example, you loaned money amounting to $10,000 at a 10% interest for 60 months. Instead of paying $212.47 amount, make it $250 instead. By doing so, you will get to repay the car loan in just 47 months! Needless to say, having only paid $2,214.69 in interest instead of $2,748.23. You see, that’s over $500 money saved.

Always Pay On Time, Never Skip Payments

There are lenders that allow borrowers to skip payments once or twice a year. While this set up is so tempting, make sure to avoid such temptation. Why? It’s because skipping payments will actually lengthen the term of your loan and even cost you more interest! Thus, make sure to not skip making payments, and to always pay on time. Late payments may cost you a lot, and that means losing money that you could have used to pay off your car loan early.

Sell Items Online

Whether it be pre-loved or brand new items, it doesn’t matter. Selling online is another legit way of earning money to help you pay off your car loan early. It doesn’t have to be big. Remember that whatever amount you get, no matter how small or big your profit is, once you put them together with other funds you saved, that could help suffice the amount you need to pay off the loan sooner.

WHAT TO DO IF YOU HAVE MORE THAN ONE CAR TO PAY OFF?

Many American households do have multiple cars and/or vehicles, and most of them are under car loans as well. So, what to then if you have more than one car loan that you want to pay off early?

The best way is to choose the car or vehicle you find really helpful and suitable for you or your family, and then focus on paying that off first — as soon as you can. Remember that it’s always easier to pay off another loan once you have already finished off or have eliminated one of your payments.

Another way is to focus on the car that offers the greatest financial savings for you and your family based on the terms of the loan.

For example, one vehicle comes with a 10% interest rate, while the other has a 6% interest rate. Between the two, choose to pay down the higher-interest debt first. That way, you get to free up more money to pay off the other car loan.

FINAL THOUGHTS ON HOW TO PAY OFF YOUR CAR LOAN EARLY

Getting car loans is inevitable – especially these days when commuting is a big risk health-wise. Contrary to what we believed in though, there are actually a lot of ways to help pay off a car loan earlier than scheduled – for as long you got the will and determination to do so.

How do you plan to pay off your car loan early?

As we said, there are plenty of ways on how to pay off your car loan early. You just need to pick one or two among the many ways to help you achieve your goal of becoming debt-free sooner.

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3 Major Ways On How Will You Finance Your Car

How will you finance your car is a vital question that every person wanting to buy his own vehicle has to answer. As a soon-to-be car owner, it is your responsibility to ensure that you are fully knowledgeable before you make a purchase.

how will you finance your car ways to do it

Dreaming of driving around the city with a new car? Well, that is possible! As long as you have the money to buy one, that should not be a problem.

But what if you don’t have the means? Does that mean your dream of driving your own car is over? The answer is no. Fortunately, there are several ways to finance your dream car, and that is exactly what we are going to talk about today.

Having a car is not just a want. In this day and age, owning a car is a necessity. More than the comfort of driving your own car, having one helps us feel more secured, and allows us to save more time. More so, owning a car allows you to travel — going from one place to another anytime you want to, and anytime you need to.

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Just a quick interesting fact. In a nationwide survey conducted by The Zebra, they found that “the majority of people (63% to be exact) believe that owning a car is necessary, despite the availability of other options like public transportation and ridesharing”.

Meanwhile, in a report by Statista, it says that there are 1.88 average vehicles per U.S. household. Furthermore, based on the data of the U.S. Department of Transportation, “the percentage of households without a car or light truck came to around nine percent in 2017, meaning that about 90 percent of households had at least one light vehicle at their disposal in that same year”.

Furthermore, in a poll by Gallup, it has been found that about 64% of respondents claimed to drive on a daily basis, while 19% of the respondents say they use a motor vehicle a few times a week.

You see, all the data we provided only shows how owning a car or driving a car is a day-to-day thing for most Americans.  So, if you are someone who is hoping to have one, that’s pretty normal. After all, as the reports said, owning a car is not just a want, but a need.

Anyway, as mentioned earlier, today, we are going to share with you some ways on how will you finance your car – your dream car. We are going to look into each way, and hopefully, we’ll be able to enlighten you as to what way fits you best.

WHY OWN A CAR

Before we even tackle the different ways on how you will finance your car, let us first and foremost answer the question of why you should own one.

As we mentioned earlier, a lot of people believe that owning a car is a necessity. Meaning, a lot of people see it as a need and not a want. You need it is going to work, to school, to make errands, etc.

But really, with a lot of other options to take you from one place to another, why own a car?

Let’s face it, owning a car is a big responsibility. You have to take a lot of things into consideration. But one of the major things that you have to take into account is the financial aspect.

Buying a car these days is not cheap. Once you have the car, maintaining it costs a lot as well. As a soon-to-be car owner, you have to make sure that you know these things beforehand. Otherwise, you might get overwhelmed with too much responsibility.

With regards to purchasing, you will have to do a lot of decision-making. Apart from the brand, model, features, price, and more, you will also have to decide whether you will go with a personal loan or a car loan (unless of course, you have all the money to buy a car in cold cash). Also, you will decide whether to get a commercial bank or a credit union or go with a dealer to help finance your car.

You see, from all that we have mentioned alone, it’s pretty obvious that buying a car is more complicated than you think.

But! Don’t lose hope. That is precisely why we are here today.

FACTORS TO CONSIDER WHEN BUYING A CAR

There are a lot of factors that you need to consider when buying a car. Some of them we already mentioned a while ago, but to give you a clearer view, here are some of the common things you need to take into consideration before buying your dream car:

  • Your Budget – You have to set a budget. We all know that budgeting is important. Having a budget will help keep you on track. Also, it will help you trim down your options.
  • Personal Income – This is very important especially if you are going to borrow money from a financial institution. You have to ensure that you have enough means to pay for the car that you like.
  • Credit Score – Just like anything in the financial world, the better your credit score is, the better your options will be. That is also applicable when you are buying a car — especially if you are looking at loaning money from the bank or from a credit union.
  • Price of the Car – There are so many car options out there, and they all differ in prices. Make sure you are fully aware of how much the car you desire is. This will help you decide whether it is within your budget or you will have to look for something else.
  • Interest Rate Offered – There are so many lending institutions out there. Make sure that before you make a purchase, you compare interest rates from different lending companies, and choose the best possible rate.
  • Term of Loan Offered by the Lender – This is usually by years. Just like the interest rate, also check the term of the loan. This will help you calculate whether you can afford to pay it for x number of years or not.
  • Personal Loan or Car Loan or Dealership – These are the three main sources of money. Meaning these are all financial entities where you can borrow money to be able to finance your dream car. It is important to check the pros and cons of each so you get to choose the one that is perfect for you.

FINANCING YOUR CAR

This time, let us move on to the real deal – how will you finance your car? As mentioned, there are several ways to pay for your car. But there are three major ways commonly used by car buyers. They either do a personal loan, an auto or car loan, or through a dealership.

Before we move on, if you want to know more about car financing, you may check out this video content made by Bladed Angel. It’s very informative, and it will really open your eyes to the ways on how you can finance your dream car. Check the video by clicking the play button below:

Done watching? Now, let’s take a look into each of the following financing options, which we already mentioned earlier:

PERSONAL LOAN

Take note that personal loan is totally different from an auto loan. Although personal loans can also be used for buying a car, these are handled differently from a car loan.

To enlighten you further, and help you understand this form of borrowing money, here are its pros and cons:

PROS

  • Cash in Hand – If you want to get your dream car at a lower price, the best way to do that is to pay in cash. Whether you are buying the car from a private seller or a dealer, paying in cash will always give you big discounts from sellers. Good thing if you have savings, otherwise, you can rely on a personal loan to do that.
  • Signature Loan – The best thing about a personal loan is that it does not require any collateral, which is the case when you opt for a car loan. You basically have to agree on the terms of the bank, and then, once the bank accepts your signature, you’re done. You get the money, and you may now buy your dream car. A personal loan is an unsecured loan. Thus, your car will not be used as collateral. So, in case you fail to pay, the car will not be taken away from you.
  • Good Bank Relationship – If you have already established a bank relationship, it would be easier for you to negotiate a better interest rate on the personal loan. More so, having a good relationship with the bank will also serve you well in case you pay late or miss a payment.

CONS

  • Interest Rate – While having a relationship with the bank can benefit you in terms of interest rate, compared to car loans, personal loans interest rates and annual percentage rates may be higher. The higher interest rate for personal loans compensates the bank for the increased risk given the fact that they do not require collateral for personal loans.
  • Incentives – Banks, as well as credit unions, do not offer incentives such as rebates or 0% financing as compared to dealers.

CAR LOANS

A car loan is the most ideal when it comes to financing your car for obvious reasons. It is, after all, specifically intended to cater to the needs of car buyers.

Anyway, here are the advantages and disadvantages of getting a car loan:

PROS

  • Customized Repayment Scheme – This is perhaps the biggest advantage of getting a car loan particularly with banks. You can create a loan scheme that provides you both flexibility and affordability. This, however, depends on the terms of payment and your down payment for the car loan.
  • Accessibility – Whether it be online or offline, through bank or credit unions, car loans are everywhere and are easily accessible. Some are even too accessible you can finish a car loan transaction in less than an hour.
  • Affordability – unlike dealership, car loans allow you to make monthly payments depending on how much you can afford.
  • Building Credit – An auto loan is one great way to help build a good credit standing — as long as you are on top of it, of course, which means you pay regularly and does not miss a payment due.

CONS

  • Interest Rate – The interest rate usually depends on your personal credit history as well as your credit score. The better your credit history and score are, the lower your interest rate may be.
  • Insurance – Once your car loan is approved, the insurance goes up drastically as well, which is not the case if you borrow money to buy a car from somewhere else.

DEALERSHIP FINANCING

Most of the time, the go-to place of people buying a car is through dealership financing, which is not bad at all because unlike banks and credit unions, dealers offer a lot of benefits to buyers. For instance, a lot of dealers offer incentives. They are able to offer low-interest rate financing because of comparison shopping. In some cases, they can afford to provide 0% financing. More so, dealership financing is also very convenient.

For more pros and cons, check below list:

PROS

  • Showrooms as One-Stop-Shop – As mentioned, it is more convenient to buy a car through dealership financing as you are already there shopping for your dream car. No need to go from one place to another. It’s like everything you need is already handed to you.
  • In-House Financing – Dealers’ in-house financing is more lenient when it comes to requirements as compared to loaning money from banks and credit unions. Basically, all you need are records that show you are able to pay, and of course, that you can drive a car out of the dealership. That’s all and you are good.

CONS

  • Higher Interest Rates – Although most dealers can offer a lower interest rate because of comparison shopping, other dealerships may tend to give a higher interest rate as compared to banks and credit unions. Also, the longer you pay the loaned amount, the higher the interest will become.
  • Aggressive – Dealers are usually aggressive when selling products to potential buyers. If you are not focused enough on what you want, you may end up being swayed in buying a higher-priced unit than what you can actually afford.
  • Collateral – The thing about dealership financing is that when you are unable to pay for your borrowed money, your car may be repossessed by the dealer. Note that borrowing money through dealership financing is a secured loan, thus, the car becomes the collateral automatically.

OTHER TIPS WHEN BUYING A CAR

Now that you already know the factors you need to consider, as well as the different ways on how will you finance your car, here are a few more helpful tips you may consider before you head on buying the car of your dreams.

1. Check and re-check your credit score. Your credit score, as well as your credit history, are two important things that you need to look into before heading to either bank, credit union, or dealer. They all look into that to have your loan approved. So, make sure you do have good standing. Otherwise, you may either get declined or you won’t get the exact amount you need for the care you are eyeing for.

2. Get financing quotes. Another important thing you need to do before you process any loan is to get as many financial quotes as possible. This will help you find the best financing rates for your desired loan amount. If you do not have stellar credit, you may try online lenders. Just get as many options as you can.

3. Research financing institutions. Apart from getting financing quotes from financial institutions, it is also ideal to research about these institutions. It’s about knowing how credible they are, and also how they treat their customers/borrowers.

4. Make a 20 percent down payment. While the idea of driving your new car without putting a single penny down is tempting, choose to make down payments instead. This will help lessen the money that you owe, which in turn can shorten the time you need to pay for the loaned amount.

5. Set up automatic payments. This helps a lot in staying in good graces with your lender. Also, this helps you avoid putting your credit score in a bad light. By setting up an automatic payment with your lending company, this helps you not miss a single payment.

FINAL THOUGHTS ON HOW WILL YOU FINANCE YOUR CAR

As mentioned, there are three major ways of how will you finance your car should you decide to buy one. But along with these ways, you also need to factor in a lot of equally important things to be able to get approved for a loan, as well as to be able to ensure that you have the capacity to pay for it.

Finding a financing institution to be able to buy a new car is actually not hard as these days, banks, credit unions, as well as dealers are all over the place. A lot of them are actually just a click away (because they are available online).

Have you decided what financing institution to deal with?

As mentioned, there are a lot to choose from. But, at the end of the day, how will you finance your car will depend on your capacity to pay.