How Do Car Loans Work?
At The Peoples Bank, we talk a lot about the Road of Life, but in many ways, it’s not just symbolic. It’s literal! Our life’s journey consists of many roads: roads that are made all the easier to travel when you own a car!
Of course, we know things are rarely that simple, and committing to purchasing an automobile is an often-overwhelming task for many of us. You can relax, set yourself on cruise control and let your friendly neighbors at The Peoples Bank break down how car loans work and how we can set you up with one today!
First things first, most people don’t have enough money to pay for a car upfront, so they have to apply for a loan. In fact, according to an article on CNBC, more than 100 million Americans have auto loans. While most people are reasonably hesitant to borrow money and owe interest, you can rest assured that auto loans are relatively easy to manage compared to other loans. When you take out a car loan, the bank will pay for the total cost of the car, and it will then be your responsibility to pay that money back to the bank over time with interest.
Ideally, you’ll want to pay back an auto loan within three to five years to keep your monthly payments lower while keeping the interest you owe to a manageable sum. Be careful not to make your loan term too long: while the lower monthly payments are tempting, the interest will sneak up on you over time, and it could even lead to a situation where you end up paying more than the car itself! Thankfully, auto loan interest rates are usually low, even more so if you have good credit, and that’s thanks in part to your car functioning as collateral for the loan. If you can’t make your car payments, your car could be repossessed, which is another reason why keeping your payments manageable and being prompt with your payments is so important!
As with any major loan, the financial institution you’re applying through will help you complete the application process to see if you qualify and what level of loan you qualify for. The application process usually requires information such as your social security number, total income via recent paycheck stubs or W-2 ready for review. The amount of other debt you have, if any, is also considered. Once approved, you’ll settle on a down payment, which will help determine your monthly payments, and then you’ll be on your way in your very own car!
Owning a car can take you to many new and exciting places on the Road of Life, and here at The Peoples Bank, we’d be more than happy to help you finance your automotive needs! Just visit our Personal Loans page or fill out our Contact Form to start the process of preparing to buy your dream car!