How EXACTLY do auto loans work?

**paparoach429** · Feb 11, 13, 12:50 am

Im finally at the point where Im financially ready to buy the car I want!

I received my income tax and have also saved some money as a down payment.

My question is: Should I apply to a few places the SAME day or does it really matter? (looking for the best rate).

Also, Should I lay off of applying for any credit cards right now, or does it really matter? If I get approved for the loan, how long do I have to use it? Is there a time limit?

Also, if the car Im going to buy is 9k, would it be smarter to try to take out a loan for 9k and instantly pay off 2k of it or should I just take out a loan for the remaining 7k? Thanks alot for your replys guys, I know Ive asked about this car stuff alot of times but I dont really have anybody else knowledgeable to ask.

**kcarter609** · Feb 11, 13, 5:59 am

I think the window is 30 days for all the inquiries for car loans to count as 1. It depends on the bank, but MOST will say you have 30 days to use the loan or they have to pull your credit again. If I were you, as long as you had enough money in savings as an emergency fund, I'd put the $2k down. Otherwise, I'd get the full $9k loan, since the interest total will be irrelevant on that little amount. I'm one of those people that has to have a 1 year emergency fund just in case though, and doesn't live on the mentality that it doesn't matter what I spend this week, I'll just go to work next week and get more money.

And yes, lay off the credit cards for now.

**DavidNY** · Feb 11, 13, 8:51 am

Check the car loan rate at your local credit union too, it could be lower than the bank's rate.

**paparoach429** · Feb 12, 13, 12:13 am

How quick do you hear from banks or Credit Unions about your loan application? I realize its late and they are closed but is it something you generally get an online answer? Will I know by early tomarro morning?

**kcarter609** · Feb 12, 13, 6:04 am

Some banks are instant, some will get back to you within half and hour.

**paparoach429** · Feb 12, 13, 11:10 pm

So unfortunatly I havent got approved yet.. I talked to USbank today and I had a rep look over everything and was supposed to get back to me by 5oclock today and never did. I also applied at PNC bank and am waiting to hear back. I realize I have somewhat short credit history and low income but I didnt think I would have THIS much trouble getting approved. You guys have any suggestions?

**DavidNY** · Feb 13, 13, 6:50 am

Visit your local credit union.

**paparoach429** · Feb 13, 13, 1:51 pm

It shows onn the website that they only do loans for 2011-2012. Unfortunatly the car I want is an 05'.

**Dylan1982** · Feb 13, 13, 10:59 pm

Hey Roach, where in Chicago are you located? I too am from the Chicago area.. I would look into a CU for a loan, and I use an AWESOME CU that I can give you all the info about.

Also, save your $2k, don't use it as a downpayment.

Have you ever used an amortization table? Basically, if you finance the car at $9k, say for 5 years (60 months) and your APR is 5%... Your loan payment will be as follows..

Number of Payments: 60
Monthly Payment: $169.84
Total Principal Paid: $9,000.00
Total Interest Paid: $1,190.47
Total Paid: $10,190.47

Now if you use your $2k as a downpayment, using the same info as above (your loan will be $7k and not $9k), here is how your payments will look:

Number of Payments: 60
Monthly Payment: $132.10
Total Principal Paid: $7,000.00
Total Interest Paid: $925.92
Total Paid: $7,925.92

If you put you're $2k down, you only drop your payment by -$32.10 and you'll save a total of -$264.55 in interest. Me personally, I would rather keep the $2k in my pocket!

**paparoach429** · Feb 14, 13, 12:24 am

Wow! I never thought of it like that! It doesnt matter to me one way or the other, I just figured I would get approved easier if I asked for a lesser amount or told them I had a 2k down payment.. If I could get the higher loan then im all for it. As far as credit unions go, dont you have to live in very close proximity of the credit union? I live on the southwest side near Archer and California. (I can see your face already. "Yikes"!) lol Anyways, like I said I thought I had a decent shot at a car loan. My oldest accounts are going on 2 years next month, only 1 30 day late ever, under %5 utilization as of right now on my cards.. Am I really that big of a risk!? lol

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How EXACTLY do auto loans work?