Auto Loans

Auto loans refer to the automotive loans you are allowed to avail of. To know if you qualify for a car loan, lending institutions usually require that you furnish the following documents before applying:

• Proof of income that is verifiable.

• Verifiable proof of residence.

• Credit history.

• Valid driver's license.

• Valid title to the vehicle.

• Personal references.

• STIPS or additional items such as tax returns, phone bills, bank statements and others.

For first-time car buyers, there are lenders who allow first-time auto loan applicants. Interest rates for auto loans usually depend on your credit history, whether it is a new or used car and the length of the car loan. The amortization period (the time the loan will take to be fully paid) for car loans is usually 36, 48, 60 or 72 months. For shorter term car loans, the interest rates are cheaper, but they require larger monthly payments than the long-term loans.

Car loans can be classified as simple interest loans. For simple interest car loans, interest is computed based on the original principal. Not on the interest accrued. Simple interest loans are oftentimes applicable in cases where the loan terms are higher than $25,000 and the term is more than 60 months.

Automotive loans can either be direct financing or indirect financing. Direct financing is the financing you obtain directly from the bank or any other lending institution. Indirect financing is financing obtained through a dealership. Oftentimes, car loans arranged through a dealership have a mark-up on the interest rate offered by the lending institution they are arranging the loan with.

In some car loans, prepayment fees refer to the charges of the lender when the loan balance is paid off early. However, not all lenders and dealerships will charge them. Even though these penalty charges are rarely applied to car loans, it would be advisable to ask if they are applicable in your case. The full amount of car loans are generally applicable to the value of the car and no more.

Auto lenders usually will not give more than the value of the car nor will they allow car loans to be used for other purposes. To determine the value of interest rates for a car loan, several factors are considered: Credit history, down payment made, credit risk and general banking factors such as the lending rate at the time you apply. Generally, the application process and approval take only a few minutes. However, it can take as long as a few hours or even days due to incomplete information and additional requirements.

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