Even though paying cash is a good way to finance a car, it is not always possible to do so. In such cases, there is the alternative of approaching a lender for a small auto loan. These loans are typically used to finance a portion of the total price of a car. Although there are a few auto lenders who fully finance cars, small auto loans take care of a small percentage of the entire cost of a car, say between 50%-60%. Small auto loans are therefore designed for people who already have a substantial amount of money for buying a car and are only looking to top up the remaining amount using a small loan.
Also, people who cannot afford to take a big auto loan or who do not wish to spend a large amount on a car can apply for small car loans. Most often, small auto loans are to be repaid within a short period of time, typically between 3-5 years. The car that you will buy will act as collateral for these loans. However, you may also need to provide other assets as security for the loan, such as a home or jewelry.
Where to Apply for a Small Auto Loan
There are many types of lenders who offer small auto loans. These include online lenders, car dealers, and traditional finance institutions such as banks. Each of these lenders has different terms and conditions for the loans they offer. Applying for a bank loan, for example, will require you to produce a great deal of papers to support most of the questions you will be asked. Traditional finance institutions also tend to keenly look into your credit scores, meaning that if you have poor or limited credit ratings you will most likely not get approved for their loans. These lenders also require you to provide some form of surety for the loan. All these requirements make their loan approval procedure a lengthy process.
Getting Small Auto Loans Online
One of the best places to get small auto loans is through the Internet. The online market is filled with many auto lenders, which has resulted in fierce competition to get clients. As such, you will easily get lenders offering attractive terms for their auto loans. By requesting quotes from some of them, you can easily land on one who will offer you the best rates for your small auto loan. After locating the lender with the best rates, you can easily apply and get approved for a small auto loan.
Requirements for Loan Approval
Before getting approved for a small auto loan, your lender will require that you be 18 years or more and show proof of a reliable source of income. Depending on your credit ratings, you can get different terms for a small auto loan. People with generally good credit scores tend to get better terms for their loans, since they are deemed financially trustworthy and therefore reduce the lender’s risk. Still, there are lenders who offer small bad credit auto loans. Before accepting any auto loan, ensure that you have first thoroughly read and understood the fine print in the contract. Find out if there are prepayment charges in case you want to quickly pay off your loan before its tenure ends.