How Do Auto Loans Work?

If we’re lucky enough at C&S Car Company to sell you a vehicle in Waterloo, IA, you’ll most likely need financing to complete your purchase. If you want to get the best deal possible, you can take advantage of how auto loans work.

It’s All About Your Credit Score

When you apply for an auto loan, the lender that gives you the money has to decide if you have the ability to pay back the installments over several years and with an interest charge. The most efficient way that it can determine your financial solvency is through your credit score.

Your credit score is a number that ranges between 300 and 850, and is created from your financial history. Numbers above 700 are considered good with those above 800 getting the best terms on loans. Scores below 670 are considered bad and may make it difficult for you to get any kind of financing at all.

You can determine your credit score by asking for your credit report from the three major credit bureaus: Equifax, Experian, and TransUnion. By law, each owes you a free report once a year. When she received the report, the first thing you should do is examine it for inaccuracies. If you find anything wrong, report it to the merchant associated with the error so it can be fixed.

Improving Your Credit Score

If you want to raise your credit score, here are a few guidelines:
  • Pay your bills on time all the time. You want to avoid late payments because your payment history forms the largest part of your score at 35 percent.
  • Reduce your debt. About 30 percent of your score comes from how much of your available credit you are using. Using only a small amount of your total credit raises your score.
  • If it doesn’t cost you anything, keep old credit cards and loan accounts open. The age of your credit accounts affects about 15 percent of your score. Older accounts are better.
Don’t expect immediate results when you try to improve your score. It may take a year or more for any changes to appear.


Before you start dreaming about which of our sedans, SUVs, hatchbacks, coupes, or vans will fit in your garage, we recommend that you get preapproved. This lets you know ahead of time how much you can afford, so you can confine your browsing to your price range.

To get started, fill out our convenient online finance application. If you have any questions, the experts at our finance department are just a phone call away. After you submit your application, we will get back to you with loan options as soon as possible. We’re just as eager to get you into a new car as you are.

What Affects Your Loan Payment

The following factors affect the amount you pay every month:
  • Annual Percentage Rate (APR) reveals your yearly interest rate plus any fees. A lower APR equals to a lower monthly payment.
  • The Loan Amount is the amount that you want to borrow to pay for your purchase. While this amount can equal the total price of the vehicle, it is typically only part of the total, once you’ve taken out the down payment and the trade-in. A lower amount equals lower monthly payments.
  • The Loan Term is the period of time, in months, that you have to pay off the loan in equal installments. The term usually ranges from 36 to 72 months.

Deciding on an Option

After we approve your application, we can show you several options that work with your budget. You generally have to decide whether you should go with a lower monthly payment that equals a bigger total expense over time or a high monthly payment that reduces your total expense.

For example, assuming you want a loan of $25,000 at an APR of 3.95 percent over a term of 48 months. Your monthly payment will come to $564 with a total expense of $27,068. If you prefer a lower monthly payment, you could increase the term to 60 months. Your installment goes down to $460 but your total expense goes up to $27,591.