Car Lot Finance

Car Loans

Car loans can be incredibly confusing and really send people into a state of panic. That’s not surprising since it sometimes seems like these are purposely made more complex than they need to be just to make the average person less likely to know when they’re being ripped off. The truth of the matter is, there are really only a few different types of loan and everything else is just a variation on those themes. Understanding what those are and how they work will absolutely make the rest of the process of getting a used car Charlotte NC much easier.


The most common form of car loans are short term loans. These types of loans are generally done during a period of anywhere from three years (36 months) to five years (60 months), with the total including interest spread out evenly over that time. A short term loan usually has a higher interest rate and, as a result of it being out for less time, higher monthly payments. The big advantages are that they are generally easier to get if your credit isn’t fantastic and you also end up paying less in the long run than you might with other types of loan because interest doesn’t have as much time to build.


Though they aren’t as common, the long term loan is also fairly often used to buy a car. Long term loans often have smaller interest rates than their short term cousins, though that’s usually because these are generally reserved for people with higher credit. The longer life of the loan means that monthly payments tend to be lower, though they usually end up being more expensive in the end because the interest payments have one or two more years to build up.


When the financial crisis hit several years ago, a slightly different type of loan started to gain popularity. These car loans didn’t go through banks or traditional lenders since, at the time, those lenders were afraid to loan money to anyone but the most sound investments. So car dealerships, needing to find new ways to finance cars, decided to start giving out loans themselves. Customers could purchase the car there, then pay there every month in person. While the interest rates tend to be pretty high on these loans, they are a way to rebuild bad credit and give you a range of payment options. You also have more direct access to the people why run your loan so you can work with them if you need to.


While you might find a few other types of loan, the majority of them will fall under one of these three categories. So take the time to figure out what is going to be best for you when you’re looking into car loans.