I encourage you to pay cash for your cars, but I acknowledge that sometimes you need a vehicle loan.
Here’s what you should know when considering a car loan:
- Car loans come with interest, like any other time you borrow money.
- Your monthly payments will depend on the length of your loan. Most car loan terms are 12-72 months.
- Look for the acronym APR. APR = annual percentage rate. This is what you pay each year to borrow money via the car loan.
- The APR you qualify for depends on your credit score. Those with Poor to Fair scores usually pay more APR on a car loan, from ~10-19%. People with Good scores pay an average of 3.96% (new cars) or 5.42% (used cars).
- Banks, car dealerships or manufacturers, and credit unions, offer car loans. Credit unions offer the best rate, usually.