How Is the Car Shortage Impacting Auto Loans
Posted: April 26, 2022 in Credit
Right now, car manufacturers face a chip shortage and they cannot keep up with the rising demand for cars. For this reason, the number of vehicles in the market is fewer. Even used cars these days are not that easy to find.
These car shortages have led to increased prices, which has affected auto loans. On the one hand, most buyers are forced to take an auto loan to pay for their vehicle purchase. On the other hand, lenders have increased their interest rates with many people applying for auto loans.
If you are buying a car with a loan, you need to know what auto loans entail to make an informed choice. This article takes you through the fundamental things you should know about auto loans.
How Auto Loans Work
Auto loans are designed to offer financing to those who want to buy a new or used car. When someone takes this loan, they get money from a lender to buy a car. Then, they agree to pay it back within the arranged time with any fees and interest. Usually, you pay a car loan in monthly installments. The exact amount varies, depending on the loan amount, term, and interest you will pay during the loan's life. Longer loan terms can take 60 to 72 months to repay. However, you risk paying more with a longer-term loan than when the repayment time is short.
What to Look for in a Good Auto Loan
You should shop around before applying for a car loan. Note that lenders use different methods to approve borrowers. Plus, their loan amount, term, and interest rates vary.
Your credit score will influence the rates you will be offered. Individuals with a higher credit score often get a lower APR (Annual Percentage Rate). Plus, they are usually given a larger loan and favorable repayment terms. However, there are auto loans available for those with a not-so-good credit score.
Once you identify a few lenders, ask them whether they offer pre-approval. This will allow you to see the offered rates without affecting your credit score. The rate you get will depend on your credit score and income, along with how long the loan will be active. The interest rate plays an essential role in your decision. If you make your payments on time, it can improve your credit score. In turn, this allows you to refinance auto loans so that you get a better rate and lower monthly payments.
Applying for an Auto Loan During the Car Shortage
There are many things to consider: the loan term, rate shopping, and the type of credit pull a lender does before deciding whether you're eligible for the loan.
When you are ready to apply for an auto loan with us, you first need to become a member. If you live, work, worship, attend school, volunteer, or regularly conduct business in Adams, Allen, DeKalb, Huntington, LaGrange, Noble, Steuben, Wells, and Whitley counties, you are eligible to join. Follow the steps below to apply.
- Visit our Loan App
- Select "Auto Loan"
- Choose "New" or "Used" Auto Loan
- Complete the application form and submit
- If you're a current member, enter your account number and continue with the application
- If you're not a member, click next to become a member and then continue with the application
- Wait for approval; approval time varies with different products
- If approved, sign the loan agreement and receive funds
The documents we require in your application include:
- Identification documents showing your name, date of birth, and Social Security number
- Proof of income - 3 most recent pay stubs or 2-year tax returns
- Proof of residence - a current utility bill in your name or a bank statement with an address listed
- Account information for automatic deduction of loan payments (If checking is selected)
Our Tools and Resources
- Loan Calculator: We offer several convenient loan calculators on our website. These calculators help you compute your monthly payments and make an informed decision.
- Loan Rates: At ProFed, we offer personal, auto, home, credit, pledge, and recreational loans with rates found here.
- Loan Protection: We make asset and loan protection a top priority for our members. Members can apply to various discounted loan and asset protection plans. This is a great way to protect your finances from unforeseen financial disasters.
We also offer several other digital tools at ProFed to make your borrowing and repayment options seamless and manageable. This includes a budget calculator, a digital banking app, and a credit score tool. Contact us today to familiarize yourself with the rest of our great tools and get an auto loan at a great rate.
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