Car Loans, What to Watch out for
Many thing have changed in the Automobile and Banking industries lately But that doesn’t mean that car loans are no longer available to you.
Institutions have become a lot more careful who they loan money to, but that’s not necessarily a bad thing. Look around, interest rates have come way down in some cases I’ve seen 0% APR.
These are loans made directly from the auto-makers or entities of the automakers which are used to entice buyers to make their purchase. Still their a lot more careful about who they give a loan to.
For a long time loans were going to those barely able to afford them and like the Banking Industry they got caught short when those loans started to default.
Does this mean that you wont be able to get a loan if your credit history is less than stellar, of coarse not, it just means that lenders are a lot more cautious and you should be too.
Before you even consider buying a new car you need to be Honest enough to ask yourself some tough questions like:
What are your finances currently like. You should also look at how secure you job is are they laying people off or may your expecting a promotion or raise.
What kind of car do you need, perhaps just some basic transportation or maybe you want the prestige of a Luxury car or something sporty with a little more power.
Keep in mind that these factors will effect not only the price of the car, but also the price of the loan in the form of interest. Remember even though the car dealers are somewhat desperate to sell cars they are well aware of the difference between the car your need for transportation, and the car you really want.
If your buying what you need (basic transportation) they no your desire is not as great, so you can probably work out a much better deal on both Car and loan. But if it’s a car you really want or desire (like luxury or Sporty) their usually more popular so they won’t be so willing to give away the house to get you to buy.
But now were getting off track, how to deal with dealers is another article altogether.
Back to car loans. There are several thing you should take into account and look for when applying for a loan.
First your credit history will always have a bearing on the loan your offered. Poor or average credit doesn’t mean you’ll be denied credit, but it will probably mean higher interest rates.
Be sure you shop and compare, you’ll find large differences from lender to lender and why pay more than you should.
You need to check the loan offer very carefully and watch out for prepayment penalties. In this case if you pay off the loan ahead of time you could receive a large penalty, That means you can’t refinance if your offered a lower rate or even if you hit the lottery and pay it off your hit with the fee (well if you hit the lottery you may not care).
No matter what you should not take a loan with a prepayment penalty, also make sure the loan is a simple interest loan, nothing fancy no amortized or balloon loans, and even stay away from variable rate loans, The current problems won’t last forever and when their over interest rate will rise.
Remember to have the lender go over the following before you sign anything. You need to know the interest rate on the loan along with the type of loan. you should also know the number of months of the loan and how much of a down payment is required.
You may get the best deal from the dealer through the manufacturer, but don’t count on that be sure to shop around for the best deal. If a lender (especially these days) can’t give you a deal that you can afford or accept, leave and go somewhere else if your prepared to do that you’ll eventually get a deal you can live with.
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