car loan process

[priotoma04]

What is the process to take a car loan & what is the maximum period to pay this loan?

[disneysteve]

What is the process to take a car loan & what is the maximum period to pay this loan?

The rule of thumb is to borrow for no more than 3 years with a monthly payment that doesn't exceed 10% of your monthly take home pay. Obviously, the less you borrow the better.

[bjl584]

What is the process to take a car loan & what is the maximum period to pay this loan?

You can get a car loan directly from the dealership or from your bank or credit union. And as Steve said the maximum time on the loan should be 3 years, and the maximum payment on the loan should not exceed 10% of your monthly take home.

[disneysteve]

You can get a car loan directly from the dealership or from your bank or credit union.

True. The best plan is to shop around for your financing before you go to buy the car. There is no one place that will always have the best rate. Sometime, the dealership will be offering special financing as low as 0%. I just bought a used car a few weeks ago and got a loan at 2.9%. I didn't need the loan. I could have paid cash. But the purchase was kind of a spur of the moment thing and simply for cash flow reasons, I took the loan. I'll probably have it paid off within a year but it avoided me having to cash out stuff early or scramble to get the money together.

[YLTL_Dan]

What is the process to take a car loan & what is the maximum period to pay this loan?

Don't forget the 20% rule - you shouldn't buy a car that's more than 20% of your annual revenue (if you make $50,000, spend $10k max). Also, I only buy cars for cash because it helps keep me within these limits.

If you go to a dealership, don't let them tell you how much the "monthly payment" will be - always think about the total cost. They make the most money from leasing and the second most from financing purchases. They make the least when people buy cars with cash - this should tell you what's cheapest for you! Also, some dealerships offer loans up to 72 months (6 years) - please stay with the three if you must finance.

[ecoadapt]

The rule of thumb is to borrow for no more than 3 years with a monthly payment that doesn't exceed 10% of your monthly take home pay. Obviously, the less you borrow the better.

This is right. But I think it depends on your monthly take home pay on how many years the company will give you.

[disneysteve]

This is right. But I think it depends on your monthly take home pay on how many years the company will give you.

I'm not sure what you mean by that. Are you saying that someone might not be able to get a 3-year loan? If you aren't borrowing too much and aren't otherwise buried in debt, I wouldn't think that would be a problem.

[kv968]

True. The best plan is to shop around for your financing before you go to buy the car. There is no one place that will always have the best rate.

Definitely shop around. As a matter of fact, you may want to do what I did when I was looking for a car and get pre-approved.

I applied online at Capital One and PNC bank for a car loan before I went out really looking and, assuming you get approved, they'll send you a check you can use at the dealer. That way you have a guaranteed interest rate if the one the dealer gives you isn't as good. And you can just sign the check over to them right then and there and still walk away with the car. An added bonus is if you're not sure what your credit really looks like (although you can always pull it up and check), getting pre-approved will give you an idea of what kind of interest rate you'll likely be paying. You may go in thinking you have good credit and expect a 2.9% rate but find out maybe it isn't that great and instead you're looking at maybe a 5-6% rate. Getting pre-approved will give a ballpark figure of what it should be.

The dealer I went to actually gave me a slightly better rate than either of the banks so I went with them but had they given me some outlandish number or one that just wasn't as good, I still could have walked with the car that day without having to go home, try to find another loan that was better (if there was one) and then go back and purchase the car. In my instance I just shredded the checks they sent and that was the end of it.

And if you do it within a month or so of buying the car it shouldn't hurt your credit score when the dealer looks at it.

[ecoadapt]

You can apply for certain car loans online but most customers/buyers apply at the dealership where the car is that they are interested in purchasing.