It is important that borrowers prepare well before they venture into auto loans. They should know and understand the basics of auto loans. This includes important aspects such as the loan term, down payment and interest rate. The loan term refers to the length of time where payments will be made for the loan. Most of the time, borrowers opt for a 36 to 48-month loan term. A short loan term is deemed better than a long loan term because the risk of the borrower to default on the loan is lessened. The next aspect, which is the down payment, is the initial cash out that the borrower has to make to establish the car purchase. This usually amounts to 20% percent of the total loan amount, which includes all the additional charges. Lastly, the interest rate is a certain percentage charged on the borrower’s monthly payments for the use of the lender’s money. This should not be mistaken as the annual percentage rate which is the total interest rate charged in a year.
Borrowers should also know the standard requirements, such as the credit report, proofs of residence and income and the down payment, in getting an autos Nashville loan. The credit report contains the borrower’s credit history and rating. It can be obtained for free from the three credit bureaus in the country. It is a major requirement to qualify for an autos Nashville loan. Lenders particularly look at the credit score of the borrower to determine the interest rate that they will charge him or her. A borrower has a good credit if he or she has a credit score of 640 and above. He or she will most likely get a low interest rate. On the contrary, a borrower has a bad credit if he or she has a credit score of 620 and below. The average credit score of borrowers in Tennessee is 687. Aside from the credit report, lenders would also be asking for the borrower’s proof of residence. Lenders ask for this so they can easily contact the borrower. Meanwhile, the borrower can present his or her pay stub as proof of income. Lenders require this to assess a borrower’s capability to sustain payments by checking if he or she has a stable income. Borrowers should also prepare enough cash to make the down payment. Not paying the down payment will result in huge monthly payments which the borrower might not afford.
Preparation is necessary for auto loans. Borrowers can not just hastily approach lenders or car dealers without having knowledge of what they are getting themselves into. Otherwise, getting an autos Nashville loan may be an added trouble instead of benefiting car buyers.