Every car is much more than a four-wheeled automobile. It’s owner’s glory, passion and a source of great admiration. Yes, a car is not just a means of transportation. It’s America’s pride and its ultimate ecstasy.
When one sets out to buy a car, several things are to be considered. Most people have an idea of what car to buy. But, there is confusion and dilemma when the topic of car loans comes up. This article will give you a detailed understanding of the many auto financing options available with you.
Money Before Everything Else
It is so true. You cannot venture out for buying a car when you have no idea about your finances. If you think car loans are going to do everything for you, think again. You will have to manage down payment and also ensure regular payments. Car loans are just to provide ease in buying.
Finding that perfect car loan requires you to carefully put together all your income and expenses and then preparing your budget. You will have to consider your savings and choose something that will not give you financial trouble.
A Plenitude Of Options
Everything depends on getting the information that suits your situation. So, don’t settle for the first financing option you get. Don’t just stroll into your local dealer’s office or your neighborhood bank. You must first do a complete research and analyze your condition and needs.
To help you make a good choice, here’s all the information about car loan types. Check out all the advantages and disadvantages of every option. It will help you make a wise decision.
A car loan with a car from the same yard- seems too alluring to ignore!
Most Americans choose dealership financing because it offers a one-stop solution. Dealers offer loans for new as well as used cars. You must know that most dealers are link between you and the lender. Such dealers won’t themselves lend you money, instead will sell you loan application to lenders.
This option is convenient but make sure that dealer is not charging a high interest rate. For that, you must research and be wary of any red flags. Also, don’t opt for any add-on if you don’t feel their need. It will help you reduce the cost.
Banks and financial institutions offer loans for almost any purpose like buying a personal item or even a holiday trip. You can avail personal loans for buying your dream car. Now, this type of financing is useful when you need a loan for a smaller amount like $15,000.
This is another option for you. When you lease a car, you only pay for the cost of using it. The biggest advantage with leasing is that your monthly payments will be significantly lower than the usual car loan payments.
You don’t have to worry about down payment and the lease agreement will get over in two-three years. You always have the option of buying the car at the end of lease agreement.
When you go for lease financing, don’t forget to negotiate the car price. Most buyers think that one must pay the full sticker price which is wrong.
If you are one of those few lucky people who have sizable assets like a house, you can go for equity loans. You can avail a home equity loan by using your home as collateral.
Although the rates are lower and the interest is tax-deductible, there is the risk of losing your home.
Though it may sound unusual, but there are many who opt for this method. A credit card can help you buy a car for a smaller amount like $10,000. You must have a low-interest credit card. With large competition, getting a low-cost card won’t be a trouble for you.
The only thing is that you will have to restrict other purchases on your card. Also, most credit card companies charge a 3% processing fees. If you are sure of paying this charge to the dealer, go for it.
This is as popular as dealership financing, if not more. In this type of loan, your car is used as collateral against monthly payments.
It is very good option if you make regular payments. The only thing that you need to keep in mind is that you won’t be able to finance a car older than six/seven years.
Online Car Loans
This type is just the blend of car loans and the internet. With technological advancements, you can get everything on the net and car loans are no different. Online lending companies have a large network of lenders and dealers who bid for your application. All you need to do is fill a simple online application form.
As there is a wide network, getting a loan is relatively easy. Also, the convenience of availing a loan without moving out of the house is very tempting.
You should only be concerned about the company’s reliability. You can check the website’s safety by going through their security certificate. Don’t go for a company that charges for loan quotes because there are many reputable sites that offer free quotes.
How To Choose That Perfect Car Loan?
Just go over with a fine-tooth comb
Once you decide on the type of car loan and apply, it’s time to scrutinize the loan quotes. Loan payments are important but it shouldn’t be the soul of your decision. There are several factors which are equally important. Before you rush to your decision, take a look at these variables.
Your loan term will have a huge impact on your loan. A longer loan term will mean that your monthly payments are smaller, but you may eventually be paying more interest rate. It is advisable that your term should be in accordance with the useful life of the car. Your loan should get over before the life of car to avoid the risk of an upside-down loan.
Interest depends on factors like the loan amount, loan term, credit score, financial condition, etc. One important tip to lower loan rates is by making a substantial down payment. This will reduce your loan amount and also instill a sense of faith in the lender.
The Annual Percentage Ratio will tell you about the total cost of the loan including all fees and charges. Most borrowers consider just monthly payments. But, it is impossible to compare different loan quotes with different loan terms. When you compare two loan quotes with the help of APR, you are taking into consideration all the variables.
You must compare loan quotes on the basis of the clauses in the loan agreements. Few lenders prohibit you from refinancing your car loan for the first few months. Some lenders also offer zero percent financing for the first few months only and then charge a floating interest rate. So, check for such clauses which may cause problem in the future.
Charges And Penalties
Check the loan contract for origination fees, annual charges, prepayment penalty and penalty for missing out on a payment. Choose a lender that has lesser fees and doesn’t charge you for making early re-payment. The latter will be useful if you decide to refinance your loan.
It is important to know whether you are supposed to make payments weekly or monthly. If you can afford monthly payment, don’t consider any other option. This is so because it will give you the choice of making regular payments without any undue financial restraints.
Once you compare quotes on these factors, you will definitely get a winner. Choosing your car loan by this method may take time but what matter is the ease in making payments. Every factor is important in making your life simpler and your car buying experience more pleasurable. So, memorize these important tips.
Owing a car is a dream for many, but one who takes a wise decision can fulfill it in true sense. Car loans won’t be a trouble if you consider your needs and financial condition. Remember a good decision comes with a thorough research process.