Compare Auto Loans

Save time and money with our auto loans comparison service: find the best deals for your car financing needs here!

Last updated by Zaving Editorial Team, on May 15th, 2024

When it comes to buying a car, getting the right financing can be a daunting task. With so many lenders and loan options available, it can be overwhelming to decide which one is best for you. That's where zaving's auto loans comparison service comes in.

We are dedicated to helping you find the best auto loan deals on the market. Our free loan comparison service allows you to compare loan options from various lenders and choose one that best suits your needs and budget. With just a few clicks, you can access a wide range of loan options, including interest rates, repayment terms, and loan amounts.

Our comparison service not only saves you time but also helps you save money. By comparing loans side-by-side, you can easily identify the most competitive deals and get the best value for your money.

We understand that getting an auto loan can be a significant financial decision, which is why we aim to provide you with all the information you need to make an informed choice. Our comprehensive guide to auto loans covers everything you need to know about financing your car, including the pros and cons of different loan options, tips for improving your credit score, and much more. 

What is an auto loan, and how do they work? 

An auto loan is a type of secured loan that is used to finance the purchase of a vehicle. It works by providing you with a lump sum of money to purchase the car, which you then pay back over time, typically with interest. The loan terms may vary depending on the lender, but usually include the loan amount, interest rate, repayment term, and any fees. The interest rate may be fixed or variable, and the repayment term may range from a few months to several years. Auto loans are typically secured by the car itself, which means that if you default on the loan, the lender can seize the vehicle to recover their losses.

What are the requirements to get an auto loan, and how can I qualify for one?

To qualify for an auto loan, there are certain requirements that lenders typically consider. While specific criteria may vary among lenders, here are some common factors to keep in mind:

1. Credit score:

  • A higher credit score increases your chances of approval and may qualify you for better interest rates.
  • Maintaining a good credit score by making timely payments and managing your debts is crucial.

2. Income and employment:

  • Lenders assess your income stability and employment history to determine your ability to repay the loan.
  • Having a steady source of income increases your chances of loan approval.

3. Down payment:

  • Providing a down payment reduces the loan amount and shows your commitment to the purchase.
  • A larger down payment can help secure better loan terms and lower interest rates.

4. Debt-to-income ratio:

  • Lenders evaluate your debt-to-income ratio, which compares your monthly debt payments to your income.
  • A lower ratio indicates a healthier financial situation and enhances your chances of loan approval.

5. Vehicle details:

  • The specific details of the vehicle you intend to purchase can impact loan approval and terms.
  • Factors such as the type, age, mileage, and condition of the vehicle are taken into consideration.

What is the difference between a secured and unsecured auto loan, and which one should I choose?

Secured auto loans

A secured auto loan requires you to put up collateral, such as the car itself, to secure the loan. This means that if you default on the loan, the lender can seize the collateral to recover their losses. A secured loan typically has lower interest rates and more lenient eligibility requirements.

Unsecured auto loans

An unsecured auto loan, on the other hand, does not require collateral, but typically has higher interest rates and stricter eligibility requirements. An unsecured loan may be a good option if you have good credit and can qualify for a low interest rate, while a secured loan may be a better choice if you have bad credit or are unable to qualify for an unsecured loan.

How can I get the best auto loan rates, and what should I look for in a lender? 

To get the best auto loan rates, you should compare rates from multiple lenders, including banks, credit unions, and online lenders. You should also consider the loan terms, such as the repayment term, interest rate, and any fees. A longer repayment term may result in lower monthly payments, but higher total interest costs over the life of the loan. A lower interest rate can also save you money over the life of the loan. Look for lenders that offer pre-qualification or pre-approval, which can help you estimate your interest rate and loan amount before you apply.

Can I still get an auto loan with bad credit? 

Yes, it is still possible to get an auto loan with bad credit. However, you may face higher interest rates and have fewer options when it comes to choosing a lender. It's important to shop around and compare rates from multiple lenders to find the best option for you.

How would my auto loan repayments work? 

Considering an example of a $20,000 auto loan with a 5-year term and an interest rate of 4.5%:

  1. First, calculate the monthly interest rate: 4.5% / 12 months = 0.375%
  2. Next, calculate the number of monthly payments: 5 years x 12 months/year = 60 months
  3. Then, use a loan calculator or a financial formula to determine the monthly payment amount: P = (L * i) / (1 – (1 + i)^(-n)) where P is the monthly payment amount, L is the loan amount, i is the monthly interest rate, and n is the number of payments.
  4. Plugging in the values from our example, we get: P = (20,000 * 0.00375) / (1 – (1 + 0.00375)^(-60)) P = $365.20
  5. So the monthly payment on this loan would be $365.20 for 60 months.

Here is an example of a loan amortization table that shows the loan balance going down over time as payments are made:

Month Payment Interest Principle Balance
1
$365.20
$75.00
$290.20
$19,709.80
2
$365.20
$73.80
$291.40
$19,418.40
3
$365.20
$72.58
$292.62
$19,125.78
...
...
...
...
...
59
$365.20
$4.49
$360.71
$548.98
60
$365.20
$2.06
$363.14
$0.00

As you can see, in the first month, the borrower makes a payment of $365.20, which includes $75.00 in interest and $290.20 in principal. The loan balance is reduced to $19,709.80.

Each subsequent month, the interest portion of the payment decreases as the loan balance decreases, while the principal portion of the payment increases. This means that more of each payment goes toward paying down the loan balance, which reduces the total interest paid over the life of the loan.

By the end of the loan term (in this example, 60 months), the loan balance has been fully paid off, and the borrower has repaid the original loan amount plus interest.

Keep in mind that this is just an example, and the actual monthly payment on an auto loan will depend on various factors, including the loan amount, interest rate, loan term, and any fees or charges associated with the loan.

What are the pros and cons of auto loans?

Yes, it is still possible to get an auto loan with bad credit. However, you may face higher interest rates and have fewer options when it comes to choosing a lender. It's important to shop around and compare rates from multiple lenders to find the best option for you.

  1. Bring your dream car within reach – Enables you to purchase a vehicle that you may not be able to afford outright
  1. Improve your Credit Score – Helps you establish or improve your credit score if you make payments on time
  1. Better Pricing – May allow you to negotiate a better price with the car dealership if you have pre-approval for financing
  1. Lower rates than personal loans – Can provide access to better interest rates and loan terms compared to other types of loans
  1. Down Payment – May require a down payment and/or monthly payments that can strain your budget
  2. Higher Rates- Can result in high interest rates, especially if you have poor credit
  3. Negative Equity – Could lead to negative equity, where you owe more on the loan than the car is worth
  4. Trade-in Implications – May limit your ability to sell or trade in the car before the loan is paid off

Top tips for getting approved for a loan

Check your credit score

Before applying for an auto loan, check your credit score and review your credit report for any errors. A higher credit score can help you qualify for better interest rates and loan terms.

Save for a down payment

Saving for a down payment can help you get approved for an auto loan and reduce the amount you need to borrow. A larger down payment can also help you qualify for better loan terms.

Shop around

Don't just accept the first loan offer you receive. Shop around and compare rates from multiple lenders to find the best option for you. Keep in mind that each lender may have different requirements for credit scores, income, and down payments.

Consider a co-signer

If you have poor credit or no credit history, consider asking a family member or friend with good credit to co-sign your loan. This can help you qualify for better loan terms and interest rates.

Show proof of income

Lenders will want to see proof of income to ensure you can make your monthly payments. Be prepared to provide recent pay stubs or bank statements.

Avoid applying for too many loans

Applying for too many loans at once can lower your credit score and make it harder to get approved. Space out your loan applications and only apply for loans that you're confident you can qualify for.

Got further questions about auto loans?

What is a pre-approval for an auto loan?

A pre-approval is when a lender agrees to provide you with a loan up to a certain amount, based on your credit history and other financial factors. This can help you negotiate a better price on a vehicle and gives you a better idea of what you can afford.

How long does it take to get approved for an auto loan?

The approval process can vary depending on the lender and your financial situation. Some lenders may provide instant approvals, while others may take several days to review your application and make a decision

What happens if I miss a payment on my auto loan?

Missing a payment can result in late fees and damage to your credit score. If you continue to miss payments, the lender may repossess the vehicle and sell it to recoup their losses.

Can I pay off my auto loan early?

Yes, in most cases you can pay off your auto loan early without penalty. This can save you money on interest and help you build equity in the vehicle more quickly.

What is a co-signer?

A co-signer is someone who signs onto a loan with you and agrees to take responsibility for the debt if you're unable to make payments. Having a co-signer with good credit can improve your chances of getting approved for a loan.

Do I need full coverage insurance for a car loan?

Yes, if you have a car loan, you'll typically need full coverage insurance to protect the lender's investment in the vehicle.

How much can I borrow with an auto loan?

The amount you can borrow with an auto loan depends on several factors, including your credit score, income, and the value of the vehicle. Generally, lenders will only approve a loan for the value of the car or truck, but some lenders may offer more than the vehicle's value to cover additional costs like taxes, registration, and insurance.

Can I get an auto loan without a down payment?

While it's possible to get an auto loan without a down payment, it's not always recommended. A down payment can reduce the total amount of interest you'll pay over the life of the loan, and it may make it easier to get approved for a loan with more favorable terms. However, some lenders may offer zero down payment options for qualified borrowers.

Can I refinance my auto loan?

Yes, it's possible to refinance your auto loan to get a lower interest rate, lower monthly payment, or to change the length of the loan term. However, it's important to consider the costs associated with refinancing, including any fees and the total interest you'll pay over the life of the loan.

Can I get an auto loan if I'm self-employed?

Yes, it's possible to get an auto loan if you're self-employed. However, you may need to provide additional documentation to verify your income, such as tax returns, profit and loss statements, and bank statements. Lenders may also require a higher down payment or offer a higher interest rate to offset the risk associated with lending to a self-employed borrower.

Is it better to get an auto loan from a bank or a dealership?

It depends on your personal situation. Banks typically offer lower interest rates, while dealerships may have more flexible terms. Shop around and compare offers to determine which option is best for you.

Can I get an auto loan if I have a part-time job?

It's possible to get an auto loan with a part-time job, but you'll need to provide proof of income and demonstrate that you can make the monthly payments.