Getting a Car Loan

First, use our loan calculators to add up the total cost of car ownership. Cars come with expenses, and you'll want to make sure you can handle all of the expense before you borrow.

Once you've decided that car ownership is right for you, you'll have to decide if you can pay cash for a car, or if you'll need a loan.

Our loan calculators can help you decide.

For the best deal, shop for a loan before you shop for a car. You'll save money on both by being better prepared before you buy, and you can enter the car buying negotiations with confidence. If your loan is worked out ahead of time, the dealer won't be able to use financing as a negotiating point in the price of the car.

Shopping for a Car Loan

Depending on your age, income and credit history, you may need a co-signer (co-applicant). A co-signer can be any adult whose credit history qualifies him or her for a loan.

Note to co-applicants: As a co-applicant, you are fully responsible for the loan on which you co-apply. If the borrower doesn't make payments, you'll either need to make the payments yourself, or your credit history will be damaged and you will be liable for the debt. In addition, the loan on which you co-apply counts as part of your overall debt.

Several factors impact the amount you'll actually pay for the car over the life of the loan:

  • Interest Rate. Interest is the money you pay for the use of the money you borrow. Interest on a car loan is expressed as an Annual Percentage Rate (APR). Typically, you can expect to pay a higher interest rate on a used car loan; you should be able to finance a new car at a lower interest rate.
    • Know whether the interest is calculated as simple interest, where you pay the same interest every month, or front-loaded, where you pay more interest at the beginning of the loan. Front-loaded interest is a disadvantage if you plan to pay the loan off early.
  • Your Credit Rating. You may have to pay a higher APR if your credit is blemished. Check your credit report free once a year at annualcreditreport.com or call
    877-322-8228.
  • Principal Amount. The principal amount is the amount you borrow, before any interest is charged. To calculate the principal amount, start with the purchase price, and subtract any down payment you'll make. Then add any after-market purchases that you elect such as warranties, credit life/accident and health insurance, etc.
  • Loan Term (length of the loan). You'll often pay more interest if your loan is for a longer period (say five years), but your monthly payments will be lower. A shorter loan term means higher monthly payments, but you'll pay less interest over the life of the loan. Plus, the bank or dealership may give you a lower interest rate for a shorter loan term.

When deciding on the length of the loan, consider how your car will depreciate (lose value). If your loan term extends over several years, the car may depreciate faster than your loan balance declines. This means you could end up owing more than the car is worth, which becomes important if the car is stolen or wrecked, or when you decide to trade it in.

Bank or Dealership?

You can get a car loan from a bank or financial institution, or from the dealership. Each has advantages and disadvantages.

  Advantages Disadvantages

Bank Loan

  • Competitive rates
  • No sales pitch for add-ons
  • Your relationship may make you eligible for benefits such as discounts off the loan rate
  • Not as convenient

Dealer financing

  • Convenient
  • Fast
  • High pressure
  • May cost more

To decide which financing method is best for you, compare these features:

  • APR
  • Application fees
  • Loan terms (length of loan)
  • Prepayment penalties

Our loan calculators can help you choose the best financing option for you.

How to Apply

You can apply for a car loan online, by phone or in person.

You'll need to bring the following with you (or, if applying online or by phone, be prepared to provide the information):

  • Social Security Number
  • Purpose of the loan (to buy a car)
  • Current employer's name and address
  • Previous employer's name and address (if at current job less than 2 years)
  • Gross monthly and other sources of income
  • Co-applicant information (if applicable)
  • Information about the collateral used to secure the loan (if applicable)
  • Vehicle dealer's name (if applicable)

Disclosures:

  • To send an email that contains confidential information, please visit the Secure Message Center where there are additional instructions about whether to use Secure Email or Online Banking messaging.