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Harbor Credit Breaks Down Auto Loans (and How Auto Loan Applications Are Approved)
By Colin Ayres
Nowadays, obtaining auto loans online has never been easier. Typically, you’ll come across forms that are not only short, but simple too. If you’re spending more than five or ten minutes filling in field after field, you’re probably just wasting your time. Instead, it should take just a few minutes to submit the necessary information. Most lenders, especially the most qualified, will contact you within a matter of days, sometimes hours, to discuss your auto loan options. The same lenders will also have bad credit car loan options as well. So, whether you are a prime or sub-prime candidate, it shouldn’t be too difficult to find a lender that can help.

Car loans work like this: First, you trade in your car for an agreed amount. Next, you make a down payment. And the difference between the sum of those and the price of your new automobile is the amount you will need to borrow for your car loan. Here’s the oversimplified mathematical formula:

[(Total Price of Car) – (Down Payment + Trade-in Value)] = Auto Loan Amount

With car loans, the Annual Percentage Rate, or APR is very important. Your monthly payments are a function of the interest rate and the length of the car loan. APR is designed to help you understand the car loan's entire cost, create a level playing field for lenders, and prevent them from advertising low rates and then hiding fees. The better your credit is, the lower the APR on your car loan will be.

Many car loans offer 60- or 72-Month loan periods, for smaller payments each month. Though lower payments may seem easier to manage, the interest paid over the financed period means you pay more, increasing the total cost of your car loan.

To better prepare for the car loan process, use an auto loan calculator – you’ll find them on major lending websites – to estimate your payments based on a car's price, length of the car loan and interest rate. By testing different auto loan scenarios, you’ll better understand what you are capable of handling.

If you’re financing a used car loan, lenders may only approve it for a model up to 5 years old. The used car loans process is more restricted because much older cars are harder to resell. Some banks charge at least 2% higher APR on used car loans, than they do for new car loans. Though, many online auto loan providers today, offer better rates.

Whether it’s a new or used car, however, applying for a bad credit car loan can be intimidating. But there are car loans for people with bad credit. Believe it or not, you can control interest rates by understanding your finances, your credit report, and all related costs. If a bad credit car loan is what you are looking for, request your credit report. This way you’ll not only understand where you stand financially, but you can also fix blemishes to improve your rating and APR.

While the amount borrowed and interest rate are important parts of auto loans, look at other factors too. Your auto loan term and the fees you pay for credit checks are crucial. Fees and interest shouldn't exceed the total cost of the car.

If, in the end, you’re not comfortable with the terms of any auto loan, consider leasing. This is a great alternative to auto loans, especially if you’re battling with bad credit.

To increase your chances of being approved for an auto loan, do the following:

•Fix your credit report – Correct mistakes and "charge offs"
•Pay attention to your credit score – Know what APR you deserve
•Close old accounts – Credit scores can suffer with them
•Understand the process of car loans – Be prepared
•Utilize an auto loan calculator – Test different APR scenarios

How Applications for Auto loans Are Approved

Applications for auto loans are approved (or disapproved) through a standardized process that involves a lender closely reviewing a list of an individual's financial statistics to gauge their eligibility.

The following are those key factors. So before