6 Keys to Getting Great Auto Loans
It’s always a delight to get the keys to a new car. For most, the only
challenge is paying for the car. Unless you have cash in hand, you’ll need
some type of auto loan. Follow these six keys to a great auto loan and you
can ride around knowing you got the best deal.|
Key to a Great Auto Loan #1: Manage Your Credit
One of the first things you should do before applying for an auto loan is
review your credit. All US consumers are entitled to a free credit report,
so use this resource. Find out if there’s anything you need to fix. Any
errors or bad habits could affect your auto loan rate.
Key to a Great Auto Loan #2: Know How Much You Can Spend
Diligent budgeters already know this, but I don’t run into very many
diligent budgeters. Track your budget any way you like (Microsoft Money is a
good tool or build your own system), and then find out how much your
payments might be with the car payment calculator.
Key to a Great Auto Loan #3: Look at the Big Picture
The terms of your auto loan will determine how much you pay now and how much
the auto loan costs overall. Remember that a low cost now may not mean low
total costs for you in the big picture.
For example, most borrowers choose a low down payment because it’s easy to
manage today. However, that choice increases the total cost of your auto
loan and usually leaves you ‘upside-down’ (meaning you owe more on the
vehicle than it’s worth) for years to come.
Key to a Great Auto Loan #4: Consider Insurance
When you ask various lenders what they’ll offer you, you may find that you
need insurance to get the best auto loans. I’m referring to disability
insurance and life
insurance at this
point. The lender is concerned that something could happen to you and you
wouldn’t be able to pay them back.
Having insurance might not be a requirement, however you should know all the
details if you already are insured.
Key to a Great Auto Loan #5: Shop Around
This is simple but it is often overlooked. The most important point here is
that you don’t have to get your auto loan from the dealership. I strongly
encourage you to check with a credit union, bank, or online lender. In most
cases your car dealer won’t have the best auto loan. By consulting with an
alternate lender before stepping onto the lot, you’ll be armed with
knowledge of what’s fair -- and you may have some bargaining power.
Key to a Great Auto Loan #6: Avoid Prepayment Penalties
Things change in life and flexibility is important. Your auto loan should
also be flexible. Find a lender that will allow you to make extra payments
or pay off the loan entirely without any penalties. It’s important to read
the fine print – some penalties aren’t called “penalties”.
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