Overhaulin'

How do Car Loans work??!!?

So, I want a new car because I hate mine. I want to get a Lexus for like 11,000. Year model is 2003 or 4. I think I have a very good credit approval rating, because I have 2 credit cards that I always pay in full every moth. One month I even paid my bill twice because I came so close to my limit. I always pay my insurance bills up front for the year and in full as well. So, I want a really good interest rate if I get a car loan. But, i really hate interest rates, and I want to pay it off as soon as I can. So, these are my questions: 1. If i pay more than my monthly payment, allowing me to repay the loan faster, will it improve my credit score? 2. Do they take the interest rate and calculate it by each month based on my new balance after previous payments? If I pay like 1,000 on my car in a month instead of the minimum payment, I would hope that the interest percentage for the next month's statement would be based on the balance after I brought it down 1,000 dollars. Is this true? So, realistically, it would cost about 700 dollars if I had a 7% interest rate on my 10,000 car loan. As I pay this off, I would expect my interest collection to be smaller and smaller each month as I continue to pay down the balance. And if I pay extra, i would also expect it to be significantly less than 700 dollars in total interest collected. Is this true? Thanks Guillemermro did you even read my question, I said I have perfect credit.

Public Comments

1. If you only have 2 credit cards on your credit profile, your credit report could appear too weak when applying for an auto loan. The average person with healthy credit has 4-6 accounts in good standing on their credit report. Having more than 6 could look like you have too much credit. And having less than 4 credit accounts could make your credit profile appear too weak. Paying more than the minimum monthly does improve your score. And your interest rate will be determined on your score and what's on your report.
2. Auto finance is what I do for a living and you looking at this all wrong. On a $10,000.00 loan at 7% for 60-months the finance charge is $1,924.00 not $700.00. Now to answer your questions in order. 1. Yes it will as long as you make at least 24-payments since credit scores are over 90% based on the last 24-months of activity. 2. Sorry that's not the way it works, paying extra will reduce the amount of interest you pay over the term of the loan but will not reduce your monthly payment a penny. The following is a list of what lenders look for to approve a car deal. Factors. 1. Loan to value (LTV). 2. Age of vehicle. 3. Term of loan. 4. Miles on vehicle. 5. Down payment. 6. Time on job. 7. Time at residence. 8. Monthly income before taxes. 9. Credit score/profile. 10. Total debt to income including new payment. What they look for; 1. Between 85% and 115%. 2. No older then 8-years. 3. 36-72 months. 4. No more then 100,000. 5. 10% of the sales price or $1,000.00. 6. 2-years. 7. 2-years. 8. $1,500.00 to $2,000.00 depending on lender. 9. 540 or above with 4 paid as agreed lines of credit with 1 being a installment loan paid at least 12 times for at least $150.00 a month and in the credit bureaus for at least 3 years. 10. Not to exceed 45%. Another thing that comes into play is called payment to income ratio so depending on the term of the loan and the interest rate you would have to budget for the payment. Most lenders do not exceed 16%.
3. If you are trying to get a Auto Car Loan and you know that your credit is not the best then you do not need to worry because getting a Car Loan even with bad credit is not that hard. Most lenders know that people nowadays have taken some hits on there credit and they have made it easier to obtain a Car Loan even if you credit is bad. http://www.worldbestloans.com/guaranteed-car-loan.htm When getting your auto loan be aware that you may be required to pay a higher interest rate because the lender will look at you as a higher risk with bad credit. It is important to understand that even though you have a higher interest that as you make your monthly payments on time this will help raise your credit score and then you can always refinance it at a later time.