What To Know First

Before arriving at a dealership, it is wise to first research vehicle financing. Bankrate’s best auto loans are selected based on a lender’s available rates and terms, customer experience and transparency. Lender highlights are outlined below to help you to determine which vehicle financing option is right for you. 

Auto loans are secured loans that help borrowers pay for a new or used car. They are available from dealerships and a variety of lenders, so it is important to shop around to find the best interest rates and terms for your vehicle. 

How to get an auto loan 

Once you find the right auto loan for your situation, follow these steps: 

1. Shop around. It is usually best to compare rates and terms from at least three lenders before moving forward with an auto loan. 

2. Prequalify. Prequalifying with lenders lets you see your potential rates without a hard credit check. 

3. Complete your application. To complete your application, you will likely need details about your car, including the purchase agreement, registration and title. You will also need documentation like proof of income and insurance, proof of residence and a driver’s license. 

4. Make payments. Your payment schedule will start as soon as you receive your auto loan. If needed, set up a calendar reminder or automatic payments to keep you on track with your monthly bill and avoid late payments.  

How to choose the best auto loan lender 

Choosing the right lender comes down to financing a vehicle you can afford. It is recommended that you get quotes from at least three lenders outside of a car dealership before deciding which is right for you. Pay special attention to the following factors:   

1. Approval requirements. Every lender has different requirements to receive approval. Lenders will consider aspects like your credit history, income and debt-to-income ratio. Your credit serves as the primary determinant of potential rates. Keep in mind that typically, the worse your credit score is, the less competitive your rates will be. 

2. Annual percentage rate. The APR represents the amount of interest that you will have to pay during the loan. Pay close attention to this number — a higher APR means more interest and thus a larger monthly cost. Also remember to shop the total loan amount, not just the monthly payment. 

3. Loan terms. While a lower monthly payment may seem appealing, pay close attention to available terms, and consider how the lifetime of your loan will impact your overall cost. A longer loan term will lower your monthly cost, but you will pay more interest. Conversely, a shorter loan term means a higher monthly cost but a lower cost over the life of the loan.