Car Loans
Buying and Selling Cars

Your Personal Finance Guide to Car Loans

If you are considering taking out an auto loan to purchase a car, you are certainly not alone. More than 100 million Americans open car loans every single year, allowing people of all income levels to access the type of vehicle they need. However, if you have never taken out a car financing loan product before, the prospect can be daunting.

The auto loan market is a vast, sprawling industry, with thousands of loan providers all claiming to offer the very best rates and payment plans. If you are looking to make sense of the auto loan market in order to find the right financing option for you, you have come to the right place. Read our essential personal finance guide for anyone looking for their first car loan in 2021.

1. How Do Car Loans Work?

Before getting into our car buying guide, it is worth briefly covering how car loans actually work. Put simply, an auto loan is a financial product offered by a lender to cover the cost of the car that you want, which you then pay back with interest and fees. They are designed to allow people to avoid paying steep upfront costs for a vehicle and secure ownership of their car via fixed monthly repayments.

You will usually have to make a down payment, which is an initial upfront cost designed to cover a portion of the vehicle price. For example, a typical downpayment for a car that costs $30,000 might be somewhere between $2000 and $10,000, depending on the loan provider. When you take on a car loan, you are entering into a contract with the loan provider.

You are agreeing to the repayment terms set out by the provider and there will be consequences for failure to meet these terms. For example, a lender might impose fines for late payments, or even repossess the vehicle if you fail to make payments. This is why it is crucial that you take on a car loan with payment terms that you know you can meet.

2. Where Can I Find a Car Loan?

As mentioned, finding the best vehicle loan options can be a tricky task, given the size and scale of the market. There are specialized loan providers out there catering to people with low credit, people looking for commercial vehicles, people looking for only a small loan to cover a portion of the vehicle cost, and just about every other kind of car shopper you can think of.

Although the auto loan market might seem complex, technology has made the process of finding the right loan easier than ever. Fortunately the team at Plenti have made it easy to search the auto loan market and instantly apply for a loan that fits your needs and budget. All you have to do is type in your budget and preferred payment period and payment costs into the search engine.

Plenti will then show you all of the best loans that fit your situation and direct you to a portal where you can apply for that loan in just a few clicks. What’s more, their customer service team is on-hand to answer any questions or concerns you might have about a loan that you are considering.

3. What To Look Out for When Taking Out an Auto Loan

When comparing auto lenders online and attempting to find the best vehicle loan options for you, there are a number of crucial factors to look out for. These include:

Interest Rates

The interest rates of an auto loan should be the first thing you look out for. Higher interest rates mean that you will be paying more for your vehicle and that your monthly payments will be higher. For example, a $30,000 auto loan with a 10% APR (annualized percentage rate) over a loan period of 10 years will result in your paying a total of $46,000 over the lifetime of the loan. The lower the interest rates, the better.

Credit Requirements

Put simply, your credit score will massively affect how favorable your loan terms are. If you have a good credit score, expect to be offered lower interest rates, flexible repayment terms, and less money down required. If you have a low credit score you will be typically saddled with high-interest rates, rigid payment terms, and strict penalties for failure to pay. There is a wealth of low credit auto loan providers out there, but choose carefully and always read the fine print.

Personal Requirements

As well as your credit score, you will also have to meet a number of personal requirements to qualify for a decent auto loan. The first of these is income. You will typically have to provide pay stubs to show that you earn enough to actually make your monthly payments. You will also have to prove you are a US citizen or green cardholder. You may also have to show proof of age, as younger drivers may not qualify for certain types of loans.

Payment Period

This is the period during which you will pay off the loan. It should be as little as three years, or it could be ten years. Shorter payment periods usually result in higher monthly payments but lower overall costs, as you will be paying less interest over time.


Many auto loan providers will penalize certain activities. Obviously, late or missed payments will result in fees. In addition, some auto loan providers will also impose a penalty for early payment of loans, as the provider is losing out on interest when you do this.


Finally, you need to check that the auto loan you want is available to you. Many auto loan providers are only licensed in certain US states, so make sure they operate in the state that you live in. In addition, many loan providers will not accept you if the vehicle you wish to finance is a commercial vehicle (for example if you wish to use the vehicle as a rideshare car). Always double-check the availability requirements of any loan product.

An Auto Personal Finance Guide at Your Fingertips

If this personal finance guide to auto loans helped you, we stand ready to answer any additional questions you might have. For expert information on purchasing and maintaining your dream car, make sure to consult our dedicated auto guides today. Our auto experts have the information you need to make smart choices about your next vehicle.