Find the Best Auto Loan Companies in Baltimore, MD

Comparing auto loans in Baltimore

When shopping for auto loans, be sure to get quotes from various lenders. Compare offers from banks, credit unions, dealerships and auto financing specialists. Be aware of the different car loan types available, including simple interest, secured loans, unsecured loans, precomputed interest loans, lease buyouts and car refinancing. Before signing a loan agreement, make sure you understand the interest rate, length of the loan, amount and frequency of payments, penalty for prepayment and the total cost of the loan (how much you will pay in interest and fees over the life of the loan).

• Down payment: A car loan down payment is the amount you pay upfront for the vehicle. Some lenders offer deals with no down payment, but that will mean higher monthly payments and most likely higher interest rates. For buyers who can afford a substantial down payment, it lowers the amount you have to take out on a loan and can also lower the interest rate the lender charges. A larger down payment typically saves you money in the long run.
• Term length: Term length refers to how long you will be paying off the loan. A secured car loan typically ranges from three to seven years, while unsecured auto loans have shorter terms. If you can afford to pay the loan off quickly, a short term length saves you interest. Longer term lengths are good for customers who want low monthly payments. Auto refinancing loans might have a lower interest rate and monthly payments, but could take longer to pay off than your original loan.
• Taxes and fees: When you purchase a car you pay sales tax on the price of the car, along with fees for registration and title. If you have excellent credit, the lender might allow you to roll the taxes and fees into your loan. If your credit is average or poor, you might have to pay auto loan taxes and fees upfront. Dealership financing typically includes taxes and fees in the amount of your loan.
• Interest rate: The interest rate is the amount the lender charges you to borrow money. To compare the cost to borrow from different lenders, look for the APR on a loan, which includes interest and fees. Unsecured loans have a higher APR, while secured loans have a lower APR. According to Business Insider, car loan interest rates at the time of publishing typically range from as low as 4% APR for borrowers with good credit to as high as 14% or more for those with poor credit.

When shopping for car loans, many lenders offer calculators that show you your monthly payments and total cost of the loan based on interest rate and term length. Using term length and interest rate from your research, along with the down payment you can afford, plug in the numbers to figure out how much you’ll pay per month and how much the financing will cost you.

As an example, consider the purchase of a 2018 Honda Accord for $22,895. With no down payment, a 60-month loan at 4% interest costs $422 per month. Over the life of the loan you will pay $25,320. If you make a down payment of $3,000, your monthly payment will be $367 and the total cost of the loan will be $22,020.

With interest of 7% and no down payment, the monthly payment goes up to $454, for a total cost of $27,240 over 60 months. A $3,000 down payment will lower payments to $394 per month and the total cost to $23,640. Before you accept a loan offer, carefully look over the numbers to understand the actual cost. Remember that taxes and fees may be additional costs. To make things easier, ask the dealership for the “out the door” price, which includes all costs associated with your initial purchase.

Applying for a car loan in Baltimore

If you apply for an auto loan from the dealership where you are buying the car, you will need to provide your name, address, current driver’s license, Social Security number, income information and proof of insurance. Car financing specialists and banks have similar requirements. The dealership’s finance department or the lender will pull your credit score. Review your credit history first to check for mistakes and ways to improve your score before applying for a car loan.

A lender looks at your credit score, along with your income, to make sure you can afford to pay back the loan. It also looks at any debts you have. Bad credit can affect the lender’s decision. You could be denied a loan altogether or you could be approved at a very high interest rate and wind up paying a high cost over the life of the loan. Many auto loan specialists work with customers who have poor credit to find affordable solutions. Consider financing a used vehicle if you have a low credit score.

After you qualify for a loan, make sure you understand fees the lender charges before accepting it. Depending on what type of car loan you qualify for, you might also have to provide collateral. Secured car loans are typically tied to the vehicle you are buying as collateral: If you are unable to pay the loan, you must surrender the vehicle back to the lender. You might also be able to use another vehicle you own, your home equity or a savings account as collateral for a secured auto loan.

Baltimore auto loan FAQ

What is the average monthly car payment in Baltimore?

The average monthly car payment in Maryland is $330 for used cars and $527 for new cars, according to AutoWise.

How do car loans work?

Car loans can be obtained from the dealership or through a lender like a bank, credit union or auto loan specialist. When you accept financing from the dealer, you complete the process at the dealership when you buy the car. When you take a loan from a different source, you secure the financing and arrange payment to the dealership.

What is a good credit score to buy a car?

A credit score (FICO Score) of at least 670 is considered good. A score of 740 or above is very good, while anything 800 or above is exceptional. You can get a car loan with a credit score below 670, but you should expect higher rates and fewer offers from lenders.

How old of a car will a bank finance?

It’s typically more difficult to finance a vehicle that is 10 or more years old. Some lenders, however, do provide loans for older vehicles.