Also known as an auto loan and automobile loan, a car loan is an amount borrowed to purchase a car. It’s structured on the lines of installment loans, secured in nature with a lower interest rate, thus requiring no collateral. In this case, the vehicle itself is the collateral. Here are some important things to keep in mind when taking out a car loan:

1. A brief history of the car loan
General Motors Corporation established the General Motors Acceptance Corporation in 1919. GMAC was the world’s first global provider of auto financing options. Fort Worth, Texas is the headquarters of GMAC. GMAC operates in North America, South America, and Asia. The firm was established to meet the rising demand for automobiles in the country following World War 1. Initially, it was set up in five cities. The first overseas office opened in Great Britain. Following the expansion in the car loan business, other automobile manufacturers initiated their own financing options.

2. Components of a car loan
Here are the basic components of an automobile loan:
● Price of the vehicle
● Loan cost
● Interest rate
● Down payment
● Your credit score
● The period of the loan
● Terms and conditions
● The process of obtaining a car loan

3. Check your affordability
Plan a realistic budget where you can control your expenses on the lines of monthly payments. With a clear financial picture, decide the loan period you can afford and the down payment that is possible. This exercise is crucial before opting for a car loan.

4. Keep a tab on your credit score
Make sure you have a healthy credit score before approaching loan lenders. Any lender looks into your credit history before approving. In fact, your credit score also determines the interest rate. Higher the credit score, better the chances to get a lower interest rate.

5. Check out multiple lenders to get the best deal
Never settle for the first lender you come across. Always keep multiple options since interest rates and terms vary between lenders. Choosing the best deal for a car loan helps you save a substantial amount of money in the long run.

6. Choose your car
This is the final step to successfully secure a profitable deal. Choose the brand and the model of your choice. Make sure to purchase car insurance while purchasing the car.

7. Get a co-signer
In case your credit score is low or doesn’t exist, a co-signer can turn things around. They bring their credit score into the picture and help you get your car loan approved. The co-signer is usually a parent or a very close relative who is willing to risk their credit score.

8. Peer-to-peer auto loan
This is for those who don’t have a cosigner to back them. This arrangement connects lenders to buyers in the “high risk” category irrespective of your credit score. The higher the risk, the higher the interest rate.