Buying a car but need help?

[Anonymous]

So I'm buying a new car but not from a dealership. but I'll need to take a loan out for 5000 dollars. I have never gotten a loan I have a credit card that I pay off early every month but I have no idea what my credit is or what process I need to go through for a loan also on average how soon would I need to pay that off?

[Anonymous]

Go down to your bank and talk to a loan officer. If they can't loan you the money, they can at least give you some advice. You will need to carry full coverage insurance on the car until you pay off the loan, and they can repossess it if you don't keep the insurance up. A $5000:loan will likely be a 3 year loan, but maybe 4 or 5.

You will probably end up paying about double the loan amount if you pay it back on schedule, as loans are structured so that at the beginning, nearly all of your payment goes to interest. Let's say your payment was $300/month - in the beginning, maybe only $20 goes towards paying off the principle, and $280 to interest. The next month, maybe $22 goes to principle and $278 to interest. Over time, more of your payment will be applied to the loan amount and less to interest. This makes sure the bank gets paid first.

If you are smart, you will pay extra, especially at the beginning. If your payment is $300 but you pay $360 that first month, that might be 3 or 4 payments removed at the end of the loan. Paying extra anytime helps, but it helps the most at the beginning, because it reduces your interest payments more at the beginning. But don't tell the bank you plan to do that, but make sure there is no prepayment penalty on the loan.

A car loan will certainly help your credit as long as you pay at least the minimum payment no later than the DUE date (not counting any grace period - it can still be late even if it's not late enough to pay a late fee). Late payments are what kills your credit.