Car Loan Advice

By • Aug 13th, 2009 • Category: Loans

Just as with any other type of loans (secured, unsecured, personal, credit and others), car loans can become a menace if you didn’t choose the option which best suits your personal needs. Everybody wants to own a new car, but not everybody can afford to buy one with full down payment. This is where car loans kick in, and if you keep in mind a few important aspects, you will definitely find the perfectly affordable and comfortable car loan. You should probably start with a car loans comparison as the market is abounding in options; lenders cannot wait for you to become their client. However, carefully study the available options, their terms and conditions and generally all the loan terms. Here are a few basics which can actually make your car loan cost less:

* Secured loans have priority. Putting up as collateral your home through a home equity loan will definitely give you some very good chances of getting money with low interest, a higher total loan amount and much better terms than you would get with an unsecured loan. Secured loans in the eyes of the lender always equal smaller risk, because you guarantee with something that you will make the repayments on time.
* Check everything from A to Z. This means that you have to look at the true overall cost of a loan, be it a car loan or any other type. The overall cost of a loan is not made up only by the monthly repayment schedule but it comprises: arrangement fees and interest rates which make up the APR, late payment fees, early repayment fees (which have to be considered as well), and any other fees that the lender may charge. Now that you know the true overall cost of your loan, you may not even be that thrilled at this opportunity.
* Avoid any kind of surprises. You don’t really need them. That is why you have to study everything related to documentation that comes with the loan arrangement (fine print, brochures with small texts, and other). You will never sign a document before you have read and understood ever single provision which is stated within the papers.
* Upfront payments – how much? As much as you can afford- the more you pay upfront for your car, the less you will have to struggle with loan repayments, interest rates, charges, extra fees, and the list can continue. Make an effort to put as upfront payment somewhere between 15%-25% of the car’s value. This will bring you generally lower fees for the loan (because you will need a smaller total loan amount).
* Make your own budget planning before even turning to a car loan. By making this calculations you will come up with a very important result: you will realize which that threshold you can afford is. Always correlate your income vs. routine expenditures, in order to avoid falling into the pit of debt. If you can’t afford realistically speaking an $80,000 car than don’t bother torturing yourself.
* Before entering a bad car loan deal, think twice. Firstly manage your outstanding loans somehow (debt consolidation for example), in order to get things straightened up on your credit report, and then you can go for a regular car loan on better terms.
* Less is more. If you choose to pay smaller monthly amounts because you feel more comfortable (meaning a longer term as well), that is tricky because you actually end up paying much more than the initial loan amount. So better (if you can afford it!) choose a shorter loan term with higher monthly amounts, and that means you will own much quicker the car, and pay less for interest.

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