everything you need to know about how auto loans work
Purchasing a car is a big decision. There are so many variables that you need to consider when deciding which vehicle will be the best fit for you or your family – not to mention, how you’re going to pay for it. You may decide to finance your new car by taking out an Auto Loan. But, what all goes into getting an auto loan? Let’s take a moment to break it all down for you!
APR – Annual Percentage Rate. This is the amount that you will pay to take out your loan, including interest accrued and any applicable fees, shown to you as a yearly or annual percentage. The higher your APR, the more you will end up owing.
Lienholder – The institution that owns your loan. For example, if you get a BlueOx Auto Loan, BlueOx Credit Union would be the lienholder on that vehicle. If you were to ever decide to refinance your vehicle or pay the loan off, you will receive a “release of lien” that states that the lienholder no longer has any stake in the loan.
Loan Term – The length of time your loan is for. Typically, the longer your loan term is, the lower your monthly payment may be.
Interest – The added price you pay to borrow money from a financial institution. The lower your interest rate, the less additional cost that is added to your loan amount.
Principal – The amount of the loan you originally agreed to pay back minus the interest accrued over the life of the loan. Interest is calculated on the balance of the loan. You can make extra monthly payments to the principal of your loan and that will save you a great deal of money over the life of your loan.
what is an auto loan?
If you’re looking to buy a new car but don’t have the money to pay in full with cash, you may consider financing your new car, also known as an auto loan. Purchasing a new vehicle is one the biggest decisions you will make and you should keep in mind several factors when you’re searching, such as the size, four-wheel drive capabilities, and even the color. However, cars aren’t cheap! An auto loan helps your dream of owning the perfect car possible.
You will also want to consider the interest rate, loan term, auto insurance and any ancillary protection products that are offered by the institution you’re financing with. Unlike a home loan, an auto loan tends to have a shorter term, usually ranging three to five years in length.
where can you get an auto loan?
There are a couple different options when it comes to choosing the institution that will handle your auto loan and it’s not a decision you should take lightly! Whoever you choose to finance your vehicle with, will become the lienholder on your vehicle – which means they have a stake in your loan just like you. The price you pay for your vehicle in principle, as well as in interest, will depend on where you get your loan.
You can get a loan through the dealership you find your dream car at; however, these loans tend to come with higher interest rates or other unexpected fees.
You can also choose to finance your vehicle with your local credit union. We recommend this option because with a credit union, you could secure a lower interest rate or APR, have lower fees and take advantage of additional benefits, which in the end will significantly save you money over the life of your loan.
auto loan protection
Many lending institutions that you can get an auto loan from offer different types of protections or insurance for your loan. Of course, it is up to you to add these to your loan or not, but it is important to know what your options are and how they can benefit you!
types of auto loan protection at BlueOx Credit Union
Payment Protection: Life can be unpredictable! There is a wide range of unexpected events that could leave you and your family in a financial hardship to pay the monthly bills. That's why it is important for you to take action to safeguard your family against these types of events to help ensure loan payments can be made on time. Payment Protection can offer you and your loved ones stability in the case of death or accidental dismemberment, terminal condition, family leave or hospital stay, disability and even involuntary unemployment.
Guaranteed Asset Protection (GAP): Safeguard your investment and avoid financial loss. This coverage can help protect you against financial loss. GAP insurance will pay the difference between what your insurance company pays and the balance of what is owed on the vehicle, in the case it is considered a covered total loss.
Mechanical Repair Coverage (MRC): Deflect some of those costly auto repairs while keeping your vehicle running extra miles and years. MRC offers nationwide protection, 24-hour roadside assistance, rental vehicle assistance, trip interruption coverage and so much more.
Auto Essentials: Vehicle protection when you need it the most! Auto Essentials is a package of coverage that protects you from normal driving incidents and out-of-pocket expenses that aren't typically covered by insurance policies, manufacturer's warranties, or extended warranties like key or remote replacement, windshield repair and so much more!
Depreciation Protection Waiver (DPW): New cars are a big deal and so is protecting your new investment. DPW protects your vehicle equity and hedges against depreciation over the life of the loan. DPW kicks in if your vehicle is ever totaled in a collision or stolen and not recovered at any time over the life of the loan.
get started today!
Ready to start your adventure? Now is the time to buy that car, truck or SUV you have been dreaming of! You can get better performance out of your budget and more miles out of your money when you finance a new or used vehicle at BlueOx Credit Union or refinance an existing auto loan from another financial institution.
benefits of a BlueOx Auto Loan:
- No money down options
- Extended terms up to 84 months on new and used autos
- Open your loan online from start to finish
- Quick and easy pre-approvals
- GAP and Mechanical Repair coverage available
- Payment protection coverage available
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