FIND THE BEST AUTO LOAN FOR YOU
Buying a new or second-hand car can be a thrilling experience, but if your present budget does not allow a cash purchase, the best option is to get auto financing. Auto loans have stipulations, with which a potential borrower needs to be familiar.
- Annual percentage rate (APR): annual rate that is charged for borrowing money
- Fixed term of the loan: usually between 24-60 months
- Monthly payment rate: what you will be responsible for each month, including extra insurance, taxes, interest rates
- Severe penalties if you default on payments or pay off the loan early: not always the case, but make sure to read the fine print
The terms of your car loan will also be affected by your down payment, as the higher down payment affordable, the shorter the term and possibly a substantial reduction in the monthly payments.
Auto Loans and Credit Scores
Auto loans are generally easier to get than other forms of financing, because not only does the car itself becomes collateral for the loan, but many dealerships offer loans with interest rates comparable or better than other financial institutions. However, as always, there is a catch!
If your credit score falls at the lower end of the scale, you will be charged higher interest rates than borrowers with a high credit score. It is a good policy to check your credit score before applying for a car loan and take steps to fix any suspect transactions on record. You can obtain your credit history for free using online using sites or visit www.carloan.com for help.
Where to Apply for a Car Loan
Car loans can be obtained from the dealership or a financial institution, like your bank or credit union. Each company offers different interest rates and terms, so it is wise to shop around for the best auto loans.
Taking the time to do research can be rewarding in terms of getting better interest rates and terms that may decrease the total loan amount. You can also check online when comparing loan rates. Researching the model of car you are buying and comparing prices is also a vital step in the process of buying a vehicle.
Understanding Cost of Car Loans
It is also important to make sure you understand the total cost of the auto loans over the entire term of the loan. This figure can vary substantially depending on the interest rate and the terms over which the loan is spread. You may be able to decrease both the term and final cost of auto loans by trading in an existing car or waiting until you have a more substantial down payment.
When negotiating the price of the car, it is preferable to keep the discussions about your auto financing needs separate from the negotiations on the cost of the vehicle. Savvy dealers may want to present a package deal that may sound good in theory, but end up costing you more than if you negotiated separately. Even though, through auto loans you may be able to purchase the car of your dreams, you must ask yourself the most important question, can I afford the auto loan? If you do not face that reality, you may end up paying heavy penalties or face even worse financial consequences.