Car loans refer to the automotive loans you are allowed to avail of. To know if you qualify to avail of car loans, lending institutions usually require that you furnish the following documents before applying:

• Proof of income which can be verified
• Valid title to the automobile in cases of trade in
• Personal references
• STIPS or additional items such as tax returns, phone bills, bank statements and others Proof of residence which can be verified
• Has good credit history
• Valid driver’s license

For first-time car buyers, there are lenders who allow first-time car loans applicants. Interest rates for car loans usually depend on your credit history, whether it is a new or used car and the length of the car loans. The length of time for car loans is usually within 36, 48, 60 or 72 months. For shorter car loans, the interest rates are cheaper. But they do require larger monthly payments than the long-term loans.

In some car loans, prepayment fees refer to the charges of the lender for paying off your loan balance early. Not all lenders and dealerships will charge them. And they are not commonly found in car loans. The full amount of the car loans are generally for use for the vehicle itself. Auto lenders usually will not give more than the value of the car nor will they allow car loans to be used for other purposes.

Car loans can be classified as simple interest loan. For simple interest car loan, interest is computed based on the original principal. Not on the interest accrued. Simple interest loans are oftentimes applicable in cases where the loan terms are higher than $25,000 and the term is more than 60 months. Car loans can either be direct financing or an indirect financing. Direct financing happens when you obtain car loans directly from the bank or any other lending institution. Indirect financing is obtained from the dealership. Oftentimes, dealership has a mark-up on the interest rate.

To determine the value of interest rates for the auto loan, there are several factors to be considered: credit history, down payment made, credit risk and general banking factors such as amount of interest the bank is charged in order that you can avail of car loans. Generally, application process usually takes several minutes. But it can be as long as a few hours due to the incomplete information and additional requirements.