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What is a Car Note and Should I Get One?

What is a car note?

As you know, car loans are loans taken out to finance a vehicle purchase. Simply stated, a car note is the payment that must be made periodically to repay an auto loan. Typically they are due monthly, though some lenders require weekly or bi-weekly payments.

How can you get a car note?

You can start paying car notes by getting a car loan. Getting a car loan requires you to approach a lender, complete a loan application, and then submit that application for the lender’s approval. You will almost certainly need to submit information such as personal ID to verify your identity plus pay stubs and bank statements to demonstrate that you have enough income coming in to handle the car loan. Some lenders might also ask for other documents depending on the state of your finances and their conditions for lending. You are not guaranteed to be able to get a car note, especially if you have a bad credit score, absolutely no history of credit usage, or your finances are in bad shape.

Once your car loan is approved and you have spent the money purchasing your vehicle, you’ll start paying car notes on the loan until that loan is completely repaid. Usually, car notes must be paid on a monthly basis once the loan is used, though car loans are diverse enough that this isn’t true in all cases. Some car loans might require more frequent payment, while others might not require payment until after a few months into the loan terms.

Can you get a car note for bad credit?

Yes, you can get a car loan and start paying car notes despite having a bad credit score so long as you are willing to pay the higher costs of taking out a bad credit car loan. Since having a bad credit score means that you are considered a risky or undesirable lending prospect by lenders, you will need to incentivize them to get car loans despite your bad credit score. Usually, this incentive will take the form of higher interest rates to be charged on the car notes, though other conditions are also possible. For example, you might be required to find someone with good credit to co-sign your car loan or make a bigger down payment on the loan to lower the principal of the loan.

In general, if you want the best rates on your car loan even if you have bad credit, you need to shop around. Banks and credit unions are usually better lender choices than in-house auto financing. Proactive attempts to lower lender risk are also likely to net you better rates and conditions. For example, lenders are likely to give you better rates if you have saved up to make an enormous down payment and have a co-signer to guarantee your debt if you default.

What does it mean when a dealership says “we tote the note?”

Toting the note means that the dealership is financing the car loan instead of helping their customers to get a car loan from lenders. Dealerships that tote the note can be beneficial to you if you have a bad credit score and can’t find a co-signer because they have almost universal approval rates for car loans. Unfortunately, this means that these car loans are even more expensive than other options and come with a host of strict loan conditions. You will be likely to required to make a down payment for a certain percentage of the vehicle’s price and be able to choose only from used vehicles. Furthermore, some of these dealership don’t report the loans to credit bureaus, which can be a problem if you are trying to rebuild your credit score.

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About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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