This table shows years across the top, and the interest rate of your loan going down. Match up the two figures to find how much you will be paying each month.

Monthly repayments - $5000 loan

You can get a more precise figure with this calculator, which is really designed for mortgages, but the principle is exactly the same. Fill in the blanks, and you will be able to see what your monthly repayments would be on your car loan.

Free Mortgage Calculator

Budget – This is probably the most important. If you take a car loan that you cannot afford, you will be stuck with a financial obligation for the next several years; if you cannot afford the monthly payment, you will go into debt. Furthermore, some states require you pay tax on your vehicle every year. In most states, this is based on the value of the vehicle; therefore, a more expensive vehicle will hold a higher tax obligation at the end of the year.

Interest Rate – The interest rate is the percentage that the bank or lender is collecting for lending you the money. Most of the time if you are buying from a ‘buy here pay here’ lot, you can expect a much larger interest rate than if you buy from a dealership.

Warranty – Some smaller lots that sell older cars do not give warranties with the purchase of their vehicles. This could be important to you if you are purchasing a vehicle that might end up breaking down and needing repair. Typically, newer vehicles come with a warranty of some kind.

The aforementioned points are the most important things to consider when obtaining a car loan. In addition to these factors, one should consider the vehicle he/she is purchasing. It should have enough room, be dependable, and last for the entire term of the loan and beyond. If you get trapped in a car that will not last the entire term of the loan, you will be stuck paying on a vehicle that does not even run.

The car loan process is often not started until a buyer has chosen a vehicle and is ready to buy. To the contrary, the process should begin before ever setting foot on the car lot, getting a pre-approval and shopping around for the best deals. Going to rate comparison websites and calling around to local banks should narrow down car loan choices. However, if buying a new car, never overlook the dealership altogether in financing. They will often provide incentive purchase rates, sometimes as low as 0% for sixty months, which is better than any bank will do. If you choose to get a car loan through the dealership’s financing institution, be careful of any additional fees that they want to tack on, often in the form of extra warranties or buyer protection.

The car loan process begins with a buyer and optional co-buyer providing background information, including yearly income, social security number, and proof of identification. The social security number will be used to obtain a copy of your credit report and credit score. The credit score is the number that is used to decide on the interest rate that the buyer will pay on his or her loan. The higher the credit score, the better the interest rate will be.

Be prepared to offer a down payment. The higher the down payment is, the more likely the buyer is to be approved for a loan. Also, because car values depreciate up to seventy percent over the life of a loan, these down payments can keep the owner from becoming up-side down in the car loan. Being up-side down in a loan means that the value of the car is less than the balance on the loan, a position no buyer wants to be in.

Be careful with car loans that charge an early payoff fee. There are many financing banks and companies that will not charge an early payoff fee, and still offer competitive rates to their customers. Also, read all of the fine print in the contract. Penalties and charges can be incurred on late payments and loan defaults. These penalties can really add up, so shop around to see whose are the lowest.