Small Auto Loans: Unique Strategies To Meet Your Finance Needs

lender showing small auto loans

Small Auto Loans

Whether it’s out of necessity or desire, we find ourselves in the market for a new car every 11 years or so. Are you in the market for a new or used car? Is an expensive car going to break the bank? Don’t panic; small auto loans are out there, and they may be exactly what you’re looking for. Keep reading and learn the type of small auto loans you should be having your eyes on.

small auto near ocean

Find Out Your Credit Score

Are you new to the world of cheap auto financing? Feel overwhelmed at the mere mention of “small auto loans?” Take a deep breath, and let me walk you through this chapter of the adulting process.

The first thing you need to know before you consider taking out a loan is your credit score. Where is it at? Is it good? Is it bad?

The more information you have going into a car dealership, bank, or credit union about your situation, the better.  In fact, you’ll have of a better chance of negotiating a fair deal and the more realistic your expectations will be.

Don’t know what your credit score is? No sweat, sign up for a free service like Credit Karma or Identity Guard and find out.

If it’s 700 and up, it’s considered a good score, while above 800 is excellent. Anything below 600 is poor to bad credit.

The higher your score, the better the chance is you’ll secure a loan. In fact, the lower the APR (annual percentage rate) will be on the loan.

Whatever your credit score may be, don’t let it get you down. There’s something out there for everyone; keep looking for the best online car financing whether it’s for good or bad credit.

Watch: The Life of An Auto Loan


No Credit Score?

If you’ve never taken out a loan or applied for a credit card, chances are you don’t have a credit score. This is a potential problem, but like any problem, one with solutions.

credit report and credit score

Build your credit: The most obvious thing to do is find a credit card and begin to build your credit. Use it to cover day to day costs and commit to paying it off online from your checking account.

No credit auto loans: It is possible to find an auto loan with no credit, but more than likely the interest rate will be high and/or you’ll need a co-signer (someone with a high credit score to commit to paying your card off if you’re negligent). Also, they may have the ability to repossess your car if you don’t pay back the loan in the agreed time period.

Personal vs. Small Auto Loans: Which Is Best?

Spoiler alert; there isn’t a universal, right answer. The best option is going to be dependent on the size of the loan you’re looking for, your credit score, and the amount of time you’re going to need to pay off the loan.

Personal Loan (Unsecured)

If you have an excellent or good credit score, this might be a good option for you.

Often when you take out a loan, you will need to offer the lender some form of collateral (something of high value they can claim if you are negligent on your loan payments, i.e. your car or your house). An unsecured personal loan does not require any form of collateral and comes in one bulk sum to the tune of $1,000 to $50,000 (depending on what you apply for).

So what’s the downside?

The interest rates tend to be higher on personal loans (the bank has to make money somehow!), and they are much more difficult to get. In fact, a lower credit score isn’t going to cut it with this type of loan. You’ll either need to boost your score or look into other options (keep reading).

Check Local Lenders

Don’t forget to check your local banks and credit unions as well as some of the larger lenders when searching for a personal loan. Credit unions are nonprofits and may have low-interest rates.banking products presentation

Even if a personal loan isn’t for you, it’s good to ask around to get an idea of what a decent interest rate would be with your credit history. Again, the more information you have regarding used car loans going into a dealership, the more you’ll be able to negotiate with them.

Do this in a concentrated, two-week period, however. These lenders will be checking your credit score, and when your credit score is checked constantly, it can weaken it. You want your score at it’s best when you apply for your loan.

Small Auto Loans (Secured)

Now, what if you’re looking for a lower interest rate or don’t have an exemplary credit score? Then a small secured auto loan may be the best option for you.

Similar to a mortgage, with a secured auto loan the lender holds ownership of the vehicle until it is completely paid off; meaning if you can’t pay the loan, the lending company can seize your car.

On the positive side, unlike many unsecured personal loans, the interest rate is fixed at the start. You wouldn’t have to worry about interest rates increasing over time.

Most car loans are fixed at repayment schedules of 36, 48 or 60 months. The shorter your payment plan is, the more you’ll have to pay monthly. However, the quicker you’re able to pay back your loan, the less interest you’ll have to pay.

If a payment schedule is becoming too oppressive to your income, talk to your lender about how to go about refinancing auto loans.

0% Interest Loans: Good or Bad?

Many lenders will offer you the “best financing for used cars” with a 0% interest rate for the first few months of the repayment. Don’t dismiss these deals out of hand, but don’t take them at face value either.

Some of the best used car auto loans may have an overall APR which would have you paying less interest over time than taking the 0% for the first few months.

Do your homework and do the math to get the best deal you can for your small auto loans.

The Smell of Freedom

Feeling overwhelmed? Let’s recap:group photo in car

Ask around other competitor interest rates, based on your credit score, and apply for a used car auto loan that’s right for you.

We may never get the feeling of that first solo drive back, but who knows?

You may find yourself in your new car, taking a random drive to somewhere you don’t need to go, inundated by the new car smell, music blaring, and freedom may surprise you once again.

Find out more about how you can boost your credit score, and find the auto loan which is right for you.

To learn more about small auto loans and other ways to improve your credit intelligence, check out our other blog posts and subscribe to our newsletter today!

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  1. Very well laid out explanation of how to secure the best interest rates for auto loans, Patrick!

    I wish I had this information way back when I had to get a loan to buy a car. It would have saved me a bunch of money on interest, I’m sure!

    I particularly liked the 90 second video, as well as the step by step approach you advise using to secure the best loan possible!



    • Thanks Jim – I appreciate the feedback.

      You’re not alone when it comes to buying your first car.  Most first timers are not prepared for the auto loan process their first go round.

      Hopefully more folks will read my site and get a leg up on learning some basic strategies they can use to finance small auto loans. 

      With some basic financing facts they can save hundreds of dollars over the live of the loan.

      All the best,


  2. I think this post gathers all the info required to maximize the optimum benefit from small auto loans.

    The strategies are well presented and can easily be referred to when deciding to buy a car.

    I’ve enjoyed going through the article and wish to acquire more financial background from your content.



    • Hi Amr,

      Thanks for reading the post and commenting.

      There is definitely a great deal of information in this post related to applying for and getting approved for a small auto loan.

      Please bookmark this site, as there is a lot of great content here that can help you improve your financial knowledge when it comes to credit.

      If you have any questions please contact me and I will be happy to assist.

      All the best,


  3. Excellent information, so nice to have this all in one place.

    Hopefully this will help people understand the process, get control of and understand their credit.

    Thank you for putting this all together.

    I found the video extremely helpful and will definitely recommend it to friends and family.

    Best wishes.

    • Yes I agree. There is lots of great information here.

      Thanks for recommending the site to your family and friends.

      There is great content here and more to come.



  4. Hi Patrick,

    Buying a car can be a daunting process. I have learned to ask lots of questions especially if the dealer is providing the financing.

    There can be lots of hidden charges in the dealer’s easy financing.

    Thanks for the idea of securing financing before car shopping. Few people realize this has an added benefit. 

    When you go car shopping, you are a cash buyer. This gives you great leverage in price negotiation.

    Further, you will buy a car within your budget, very important for your future credit rating, and not be swayed by that beautiful but too expensive car on the dealer’s lot.

    What about down payments? Can I get a better interest rate by putting some money down on the car?

    Thanks for your suggestions.

    • Hi Joe,

      Great comments!  It looks like you get the car buying process and understand the nuances of auto financing.

      It’s definitely a good idea to secure financing particularly for small auto loans before heading off to the dealership.  This way it provides more negotiating leverage.

      As you pointed out securing financing, then negotiating as a cash buyer is the way to go.  Then once you have nailed down the price for that shinny new car, you can change your tactics and switch to financing options.

      If the dealer has better financing than what you showed up with, consider going with the dealerships offer. Just watch out for the terms and hidden fees.

      Having a down payment will certainly improve your chances of snagging a better rate.  The more the better, but 20% (if possible) seems to be the rule of thumb.

      The nice thing about a large down payment is that it will help keep your monthly payments lower and there is less chance of going upside down on the loan.



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