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Do the research to find the best auto loan for you

After you've researched what kind of car you want to buy, do some additional research to figure out the best way to pay for it.

Types of auto loans

There are 2 types of car loans: new car loans and used car loans. Used car loans tend to be a bit more cost-effective than new car loans simply due to the fact that used cars typically don't lose as much of their value as new cars when driven off the lot.

Issues to consider

Whether you're buying a new car or a used car, there are some important things you need to consider:

  • Down payment. The bigger your down payment, the smaller the loan you'll need to take out to pay for the car and, therefore the smaller your monthly payment will be.
  • Credit history. The interest rate you'll get on your auto loan is going to depend in large part on your credit history. The stronger your credit history, the better the rate you'll get. You might want to check your credit score before you apply for financing and, if your credit is less than stellar, think about trying and build it up before you attempt to get the loan.
  • Interest rate. Your interest rate will also depend on who is financing your loan. Shop around and watch out for special offers: A loan with 0% interest may sound great, but you might find when you read the terms that you'll end up with a much larger monthly payment than you would have had with a low-interest loan. This is because many 0% interest loans are only offered with shorter repayment terms.
  • Loan period. Consider the length of time you want to carry the loan. Extending your loan over 5 or 6 years may lower your monthly payment, but it will also increase the amount of interest you are paying and, therefore, the total amount you end up paying for the car.

Repaying your auto loan

One of the most important questions you need to ask yourself when you get your car loan is: How long is it going to take you to pay it off? If you decide to go with a longer term payment plan, you'll have a smaller monthly payment, but you'll end up paying more over the life of the loan. If you choose a shorter term payment plan, you'll have a higher monthly payment, but you may be charged less interest, so you'll have a better chance of paying less over the life of the loan.

It's important you make your payments on time and in full. Missing payments, or ultimately defaulting on your loan, will negatively affect your credit history and will make it more difficult for you to get any type of loan in the future.

Credit score

A number that rates the quality of an individual's credit. Credit reporting agencies calculate this number, often with the assistance of computer systems. The number helps predict the relative likelihood that a person will repay a credit obligation, such as a mortgage loan. In general, the higher your credit score, the more likely you are to be approved for and to pay a lower interest rate on a loan.

Interest

A fee charged for borrowing money. Also refers to money that a financial institution may pay individuals for keeping their money in an account there (such as an interest-bearing savings account).

Need an auto loan?

  • Bank of America hopes you'll consider us while conducting your loan research. We offer great fixed rates, a large dealer network, a simple loan application and much more.
  • Get auto loan details ››

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