How Does Car Financing Work?

Signing Finance Documents for Car


What does it mean to finance a car? Most Port Huron car-buyers opt for a financing deal, which allows you to pay for a car in manageable monthly installments rather than all at once. To help help you learn more about how car finance works, we’ll address these common car-buying topics in the how-to guide below:

  • How to apply for a loan
  • How to get approved a car loan with bad credit
  • How to get the best possible interest rate on a car loan

How to Apply for a Car Loan

After choosing a car that fits your budget, you’ll need to choose a lender and submit an application for a car loan. You can either work with a traditional lender or financial institution such as a bank or credit union, or work directly with your dealership. If you choose to finance in-house with a dealership like Moran Chevrolet Fort Gratiot, we’ll take care of submitting your loan applications to multiple lenders. In addition, you would negotiate the terms of your loan with us, rather than the lender.

Whether you finance in-house or with a financial institution, the interest rates available to you will depend on the following factors:

  • Your credit score
  • The principal loan amount
  • The length of the loan term
  • Your debt-to-income ratio
  • The age of the vehicle

How to Car Financing with a Bad Credit Score

Your credit score is probably the number one factor when it comes to loan approval and getting a desirable interest rate — but how does financing a car work if your credit score isn’t where you’d like it to be? Getting approved could take a little extra time if you have a low credit score, but it’s definitely still worth your time to apply! Here’s what to keep in mind if you’re looking for a bad credit car loan in %%target_city_2%:

  • If you’re applying for an auto loan with a low credit score, you should expect to pay a higher interest rate.
  • If you don’t need a new car immediately, it may be worth your while to take a few months to raise your score — especially if your score is just below the cutoff for a higher rating category.
  • Paying off old debts, cleaning up errors in your credit report, and reducing your debt-to-credit ratio can give your score a quick boost.
  • If you can, offer a larger down payment to see if the lender will offer a lower interest rate.

Finalize Your Loan Terms

Whether you’re working with a lender or a Lake Port-area Chevrolet dealership, you may be able to negotiate a lower interest rate by providing documentation that supports your ability to pay in a timely manner. That said, your dealership may be more flexible than a lender when it comes to adjusting the terms of your loan. After finalizing the loan terms, all you need to do is sign the paperwork and hit the road in your new Chevrolet!

Learn More About Car Financing in Fort Gratiot

If you have any further questions about how car finance works, the team at our finance center is happy to help. Contact us or check out our car-buying guide for expert advice on how to trade in a financed car when you still owe money on the loan, how to decide between a used or certified pre-owned Chevrolet, and much more.


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