What You Need to Know About Car Loans

What You Need to Know About Car Loans

loanneedCar loans are very important and very expensive. If you are taking one out, you want to make sure you are getting a good deal and a deal that you can stick with for a long time.

Here are some tips I would like to share about car loans:

  1. Your credit determines your interest rate – the better your credit rating is, the better APR you can get. Those with excellent credit often get the advertised rates but if you’re one with less than perfect credit, you will have to manage your expectations because you will surely get a higher rate. Those 5.1%, 5.7% and the like are only for the high credit scorers. How do you become one? Well, it beats me, really because I am just as hard up with my finances as anyone else.
  2. Determine a budget before you head on to car dealers – You don’t want to decide on how much you will spend once you are already there looking at those great cars. If you’re looking for a car that’s within your budget, higher priced cars don’t confuse you because you simply don’t look at them anymore. I have a friend, yes I have quite a few, who went car shopping without so much as thinking about how much he was willing to spend on a brand new car. The salesman of course did his job and sold him the car making him believe that he could afford it if the term was longer. Needless to say, he did find it very difficult to cope up with that added expense.
  3. Look at the total cost – ask for a total cost computation to see how much your car loan will cost you in general. A low monthly repayment rate and a low interest rate may not necessarily mean big savings for you if the term is too long. Most car loan comparison sites have online car loan calculators so you can check how much everything will cost. Even considering deposits is a must because if you pay low deposits now, it may mean that you have a higher balance that will be accruing interest so try to weigh things out.
  4. Shop around – like anything else you are buying, the key to finding the best is to shop around and compare what you are getting at what cost. You may be able to find a better deal just by going the extra mile of looking at other car deals from other dealerships or car loan providers. There are plenty of sources for car loans so don’t hesitate on turning down one even if you liked their service a lot if you find a lower deal somewhere else.
  5. Ask about prepayment fees – if you are planning on paying your car loan off early or if you think that this is something that’s possible for you to do, make sure that your car loan provider does not charge an early payment penalty fee. Sometimes, an early payment fee could be as much as a couple of months’ interest, which is a lot of money.
  6. Look at insurance options – since you are making an expensive investment for buying a new car, you might as well look for the most appropriate insurance policy for your car.

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