You might have questions like what is an auto loan? why you ‘ll need an auto loan? What kind of auto loan you can be eligible for and what terms you can be offered?
If you’re looking to buy an automobile and you have a plan to finance your vehicle, then you’ll have to consider your credit history and credit scores. They will help in determining the kind of auto loan you’re appropriate for and what kind of loan terms you might be presented.
Next question arises that what is your credit history and how does it depend on your credit scores? So lets consider a person, who takes loans very often. His credit history is in the form of a credit report. That is discussed after credit score is properly defined. Credit score is the three-digit number that tells lenders how likely it is that he will pay back any money he borrowed. It helps lenders decide whether they want to give him a loan and what kind of interest rate should they offer him. This is totally based on the information provided in one’s credit report, which is a record of how he has managed his credit in the past. Also, how much debt he carries, and whether he has made his payments on time.
Some car loan lenders use scores that are not general, in fact, they are very specific to your autohistory, like the FICO auto score. It works in a way that it takes your auto score which then extracts your credit history to another level by evaluating the probability that you’ll pay back the loan granted for a vehicle. Many of the of car loan lenders use this FICO auto score. FICO’s auto scores have a range from 250 to 900. We can interpret this in a way that the better one’s auto score, there is more chance that he can get a lower interest rate on an auto loan. A score of around 700-750 or higher is generally considered a really good score and it can help you qualify for the lower rates on car loan interest.
In order to make sure that you’re being given a fair interest rate, you have to compare financing offers from different sources. Car manufacturers tend to offer the best rates if you’re buying a new car, but credit unions and small banks often offer competitive car loan interest rates as well.