First Time Buyers Guide To Car Loans

Buying a car can be daunting.

Buying a car can be daunting. With talk of APR, interest, financing fees, leasing… it can seem more complicated than it has to be.

We’ve compiled a guide to help you learn how a car loan works and how you can start today on your path to purchasing your new vehicle.

What does it mean to finance a car?

Financing a car means that instead of paying for the car in full, you borrow money from a lender to cover the cost of the vehicle. Over time, you pay back the loan with interest each month.

Every loan comes with some fees and interest as payment for borrowing the money, but some are much better deals than others. Because of this, it’s very important to compare and contrast your loan options before you decide.

How do I decide what car loan I need?

Before you decide what loan is best for you, you should consider a few things.


What is your overall and monthly budget for a vehicle? It is important to consider how much you want to pay in total for a car, as well as how much you can afford to pay per month on a loan.


Be sure to be familiar with your credit score. This might limit your options when it comes to how much money you can borrow and at what rates.

Buying vs. leasing

Do you want to buy or lease?

Leasing a car is a form of financing where you pay each month to use a car, akin to renting an apartment. Because of this, when your lease is up, you have to return the vehicle. Leasing can have lower monthly costs and allow you to have a new vehicle every few years, but leasing has its drawbacks, including mileage limits.

At the end of the lease, some contracts will give you the option to buy the car, which you can do with a lease buyout loan.

Buying a car has higher costs, typically requiring a down payment and higher monthly payments. But, at the end of it all, you own the title to the vehicle and will have no car payments after you’ve repaid your loan.

New vs. used cars

Do you want a new car or a used car? New cars have greater longevity, which can mean a greater return on your investment. Older cars, though, do not depreciate as rapidly in value.

Be sure to think about how long you’d like to keep the car and how much you drive when considering these options.

APR and fees

Once you’ve decided on your budget and what kind of car you need, you can start to look at your loan options. You now know how much you’d like to spend overall, and how much you’d like to spend per month.

It’s important to consider the APR (annual percentage rate, which is the percentage you have to pay on top of the money you borrowed including any fees), length of the loan, and any other terms and conditions of the loan, like what kind of car insurance you need to have.

You should consider both the monthly rate you are going to pay as well as the total cost of the loan after interest. Using an auto loan calculator can help you ensure that the loan you are choosing aligns with your goals.

Where do I look for loans?

Auto loans are offered by local banks and credit unions, private lending companies, and sometimes directly at the car dealership. Many different companies offer loans. The most important thing you can do is do your research and talk to an expert.

At Baton Rouge Telco, we can walk you through all of your options and make sure you are not missing out on any savings. Keep in mind that local banks and credit unions will oftentimes offer discounts for being a member that can save you additional money.

How do I apply for a loan?

Nowadays, many companies process loan applications online. However, you have multiple options, including going to your local bank or credit union in person. Check online or call ahead to ensure you have all of the documents you need with you when you set out to apply.

Typically, the process is done in a few steps and requires documents that include your personal information, social security number, employer information, financial information, your requested amount, and purpose for the loan.

At many financial institutions, you can ask for pre-qualification, which is a soft credit check that does not affect your credit score. This gives you an idea of how likely you are to be approved.

When you apply for a car loan, a hard credit check will be performed, which will be registered on your credit report. If you submit all credit inquiries within two weeks, they will all register as one joint event, affecting your credit score less than if you inquire over a longer period of time.

Should I get pre-approved for an auto loan?

It’s a great idea to get pre-approval for your ideal loan before you start shopping for cars. This can keep you grounded when exploring all the features available to you and give you some bargaining power when it comes to negotiating financing offers from the dealer.

Now that you understand how a car loan works, it’s time to get started!

Baton Rouge Telco offers a competitive range of loan options that can get you into the driver’s seat of your new vehicle with ease. Click the button below to check out our loans, terms, rates, and get expert advice to get you started on the process.

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