how do bank loans work?

[HybridSquirrel]

i dont get it. i am trying to work my credit up and i dont want to get a credit card because i will be too tempted to use it. i want to get a bank loan for a car. not alot maybe 10k....but i dont get how it works i put money down but that money down doesnt go towards the loan? ex. i put say 2500 down instead of paying off 7500 i have to pay off the full 10k. what gives?

 

[FoBoT]

uh, lets say you buy a $12,500 car

you pay $2500 in cash and get the other $10,000 from the bank as a loan


so then you owe the bank $10,000 and pay off $XXX each month for 36 or 48 or 60 months plus interest

that is about it

 

[HybridSquirrel]

will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

 

[SmoochyTX]

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Have you called your bank or credit union yet?

 

[RossMAN]

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

 

[Strk]

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

If you want a $550 car payment, sure. However, the term of the loan and when you repay it are separate. You can pay off a car loan early. The time you agree to it just what it will take at the minimum. That is, say you take out a 60 month loan, with a monthly payment of 200. In order to stay up to date with the loan, you need to pay 200 a month. You can pay more and that will go towards the principal (the actual amount you borrowed, no the interest). You may have taken out a loan for 60 months, but you can pay it off much earlier without penalties at most places (make sure of this though, as fees are always possible).

 

[HybridSquirrel]

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

my dad works at the treasury department at the bank id be taking a loan out at and i dont like asking him for stuff because i want to do it by my self and not with his help. so no i didnt learn this stuff yet. and when i talked to the bank they asked the ammount of my downpayment

 

[thehstrybean]

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

 

[mugs]

Originally posted by: HybridSquirrel
i dont get it. i am trying to work my credit up and i dont want to get a credit card because i will be too tempted to use it. i want to get a bank loan for a car. not alot maybe 10k....but i dont get how it works i put money down but that money down doesnt go towards the loan? ex. i put say 2500 down instead of paying off 7500 i have to pay off the full 10k. what gives?

FoBoT explained it pretty well. You take out a loan for the amount you want to borrow, not the amount you want to borrow + your down payment. So if your downpayment is $2500 and the car is $10,000, you only take out a $7500 loan, not a $10,000 loan.

 

[mugs]

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

 

[RossMAN]

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

Personal finance class in high school?

 

[RossMAN]

Originally posted by: mugs

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

That's a damn shame.

 

[tfinch2]

Originally posted by: RossMAN

Originally posted by: mugs

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

That's a damn shame.

People need a class in it?

 

[RossMAN]

Originally posted by: tfinch2

Originally posted by: RossMAN

Originally posted by: mugs

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

That's a damn shame.

People need a class in it?

I started learning when I opened my first savings account at the age of 14. My personal finance class was a joke. Here's how you complete a time sheet, balance your check book, write a check, etc.

Real life experience FTW!

 

[thujone]

Originally posted by: RossMAN

Originally posted by: tfinch2

Originally posted by: RossMAN

Originally posted by: mugs

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

That's a damn shame.

People need a class in it?

I started learning when I opened my first savings account at the age of 14. My personal finance class was a joke. Here's how you complete a time sheet, balance your check book, write a check, etc.

Real life experience FTW!

my senior year i actually got threatened with not being able to graduate because i didn't finish a project for one of these classes. it was how to make a monthly budget... and it involved cutting things out of newspaper ads.

i didn't want to do it on the principle that i know how to both A) spend money on what i need and B) cut things out with scissors.

i turned it in a few days before graduation on a skip day... mildly inebriated.

 

[SmoochyTX]

Originally posted by: thujone

Originally posted by: RossMAN

Originally posted by: tfinch2

Originally posted by: RossMAN

Originally posted by: mugs

Originally posted by: thehstrybean

Originally posted by: RossMAN

Originally posted by: HybridSquirrel
will they let you take out a loan without a down payment? can you get a loan for like 18 months? i dont want to be paying off a car for the next 4 years of my life..

Yes you can take out a loan without a "down payment".

What you want is a personal installment loan. Terms range from 12 months to 60 months. They usually have requirements like a minimum loan amount of $1,000 and loan fee.

Don't they teach this stuff in personal finance?

In what?

A class that most high schools don't teach, but which would be very beneficial to students.

That's a damn shame.

People need a class in it?

I started learning when I opened my first savings account at the age of 14. My personal finance class was a joke. Here's how you complete a time sheet, balance your check book, write a check, etc.

Real life experience FTW!

my senior year i actually got threatened with not being able to graduate because i didn't finish a project for one of these classes. it was how to make a monthly budget... and it involved cutting things out of newspaper ads.

i didn't want to do it on the principle that i know how to both A) spend money on what i need and B) cut things out with scissors.

i turned it in a few days before graduation on a skip day... mildly inebriated.

Well aren't you special.

 

[mugs]

Originally posted by: tfinch2

People need a class in it?

Considering how little many people know about personal finance... yeah. Just look at the number of threads here on Anandtech asking basic questions about personal finance.

 

[RossMAN]

Originally posted by: mugs

Originally posted by: tfinch2

People need a class in it?

Considering how little many people know about personal finance... yeah. Just look at the number of threads here on Anandtech asking basic questions about personal finance.

Yep.

 

[tk149]

Originally posted by: mugs

Originally posted by: tfinch2

People need a class in it?

Considering how little many people know about personal finance... yeah. Just look at the number of threads here on Anandtech asking basic questions about personal finance.

QFT

 

[Alone]

I took the class. Unfortunately, I didn't retain much.

So...here's a quick one:

I'm thinking about getting a small loan (3-4k), but I don't have a credit history. I work part time, so I only make about $1,000 a month. Would I have trouble getting a loan?

 

[GuitarDaddy]

Originally posted by: HybridSquirrel
[
my dad works at the treasury department at the bank id be taking a loan out at and i dont like asking him for stuff because i want to do it by my self and not with his help. so no i didnt learn this stuff yet. and when i talked to the bank they asked the ammount of my downpayment

Banks and loan companies always try and "secure" loans. Which means they want some assurance that you will pay the loan back. There are several ways that they do this.

1. Credit rating/credit history - if you have a good history of payments on previous debt
2. Collateral - you put something you own up as a guarantee that you will repay the loan and if you don't the bank can take it. (Almost all auto loans require you assign the title of the vehicle to the bank until it's paid off)
3. Cosigner - someone with a good credit history co-signs the loan agreeing to pay it if you don't
4. Down payment - the idea here is that a down payment shows financial responibility and makes you a vested partner in the transaction (ie.. you have something at stake if they have to repo the vehicle) the bigger the down the better. And it also helps assure that the market value of the car exceeds the loan amount in case they have to repo and sell the car.

Banks try and secure themselves by at least two of these methods. In your case being young and without any credit history they will require at least a combination of #2&3 or
#2&4

You may be able to get away with 2 & 4 if the downpayment is big enough, but the more likely scenario is 2 and 3

Do some more research, talk to the bank again, then talk to your dad about co-signing the note. Doing your own research and finding out the necessary facts will impress him and let him know your serious. Almost all parents have to co-sign for their kids first car, so don't be ashamed to talk to him about it.

 

[HybridSquirrel]

Originally posted by: Alone
I took the class. Unfortunately, I didn't retain much.

So...here's a quick one:

I'm thinking about getting a small loan (3-4k), but I don't have a credit history. I work part time, so I only make about $1,000 a month. Would I have trouble getting a loan?

i dunno, i am wondering the same thing

 

[archcommus]

Originally posted by: Alone
I took the class. Unfortunately, I didn't retain much.

So...here's a quick one:

I'm thinking about getting a small loan (3-4k), but I don't have a credit history. I work part time, so I only make about $1,000 a month. Would I have trouble getting a loan?

You won't be able to get a loan on your own typically without at least two years of credit history, so to get a loan in your name you'd need a co-signer.

I had a personal finance-like class in high school, but it wasn't worth much. Learned stupid stuff like DON'T MAX OUR YOUR CC and how to write checks. I learned by opening my own checking account when I was 17 years old, getting a job, and learning from my parents' mistakes and being responsibile to manage my money.

 

[HybridSquirrel]

Originally posted by: archcommus

Originally posted by: Alone
I took the class. Unfortunately, I didn't retain much.

So...here's a quick one:

I'm thinking about getting a small loan (3-4k), but I don't have a credit history. I work part time, so I only make about $1,000 a month. Would I have trouble getting a loan?

You won't be able to get a loan on your own typically without at least two years of credit history, so to get a loan in your name you'd need a co-signer.

I had a personal finance-like class in high school, but it wasn't worth much. Learned stupid stuff like DON'T MAX OUR YOUR CC and how to write checks. I learned by opening my own checking account when I was 17 years old, getting a job, and learning from my parents' mistakes and being responsibile to manage my money.

cant even get a loan if you put up the car for collateral?

 

[GuitarDaddy]

Originally posted by: HybridSquirrel

cant even get a loan if you put up the car for collateral?

Nope, not on that alone. Thats a requirement of the loan even for those with established credit. But you will need more, either a sizeable down payment or a co-signer.

Think about it from the banks perspective. If they loan on an auto with the only security being the car itself and you make payments for a few months then stop paying. They have to go through the repo process (which costs money), then they have to sell the car (which costs money) and they aren't guaranteed to get what they loaned you for it when it sells due to depreciation/misuse/damage and general market conditions(more money). And banks don't have the time or resources to try and get top market value for repo'd cars, the usually sell them to wholesalers/dealers at less than the market value. Banks aren't in business to take those kind of risks.

And you may wonder why I'm explaining in such detail
1. I'm a Finance/Accounting pro thats been in the business for 25+yrs
2. Grew up in a banking family, dad worked his way from loan officer > senior LO > VP > president > CEO > retired
3. Got kids myself and been through this speach and process with them