Explain car loans to me

I’ve been playing around on Bankrate.com, with cost calculators and such, but there a couple of totally dumb questions I can’t find answered on there.

  1. Can you use a car loan on a used car? I feel like the answer is yes, of course, but I’ve never bought a car.

  2. They provide average interest rates, but I have bad credit. Rather than get suckered in by some ridiculous predatory company charging 30% interest on a car loan, I’d like to know up front if the major, trustworthy lending sites are going to charge me an arm and a leg, or just deny me.

  3. And how does this whole thing work anyway? Do they just mail me a check, that I could conceivably go spend on 10,000 dollars (or whatever) worth of hookers and blow?


Bad in my case means a credit rating in the low 500s. I checked it last about 6 months ago, and it was about 520, and although I haven’t done anything that would screw it up since then, I also haven’t taken any steps to improve it.

Also, another silly question, if I get approved by more than one service (unlikely), then as long as I don’t use the check they send me, I’m off the hook, right?

As Shagnasty said, no one is sending you a check. You can solicit as many places as you want and get approved by as many places as you want, but the dealer is only going to be getting paid by one place. The place that loans you the money buys the car for you and then you are on the hook to pay that place back. You will never see any money.

Oh, I had misunderstood for some reason, even though it was perfectly clear upon rereading it. I thought he meant that I was sent a check made out to the dealer or something.

From previous personal sad experience – ensure that the agreement you sign does not permit “selling your debt” to another company. You may have made arrangements with your lender that are mutually acceptable, such as a convenient payment date – but the company buying your debt, i.e., assuming the role of your creditor, is not bound by them, and is likely to be a prick about them.

I suspect that outside the Pit it’s inappropriate to badmouth a particular company by name, but let me say that if the prospective lender wants to know what’s in your wallet, I’d recommend not doing business with them.

Yeah- that information tells them if they want to pick it… :wink:

There are probably a few very easy things you can do to get your credit score up to around 580 or 600. Getting the score higher becomes exponentially more work from there.

There are people whose hobby it is to help you figure all this out and they aren’t difficult to find.

Some credit unions are more picky than others but they generally seem pretty honest compared to car dealers. Pentagon Federal is for example real picky but real honest. Something to do with powerful military guys as clients I guess.

Your credit and the age of a car will be used in a formula to determine how much you need to have for a down payment.

While you can use a car loan for a used car, the rate may be different. Typically used car rates are a bit higher than new car rates.
While I have no cite, I have heard that too many inquires can drop your credit score. So you might not want to apply to every company you find on the net.
I don’t know what your budget is, but often car makers over lower than market rates on certified used cars. These also come with a factory warranty.

I would respectfully question the accuracy of these statements.

You will be unlikely to find a creditor who will agree never to sell your debt. If you finance through the dealer, your debt will be sold before you walk out the door, in many cases multiple times. Even if you finance through a small local bank, odds are your debt will be sold dozens of times before it is paid off. That’s just the way the modern credit market works.

Polycarp might be referencing some situation where maintenance of the debt changes hands. I don’t know about that. But I do know that you are bound only to the terms of the contract you sign. Your debt changing hands will not change any material terms of your loan.

On another note, I’ll just add that when a lender makes a car loan, the lender usually retains the title to the car. As in, the fancy little slip of paper that lists the owner of the car will have the lender’s name on it, and the lender will actually keep physical possession of the document until you send in your last loan payment. I know this from filing hundreds and hundreds of the damned things in fireproof filing cabinets in the loan department of a bank. Ugh.