Auto finance is often less complicated than people think. Buying a new car is a simple process with a happy end, in most cases. The usual way of financing a car is through a bank, with the aid of a car loan. Doing a thorough research before making the final financial decision is the key to a successful car purchase. The first thing you need to do is estimate your monthly budget. If uncertain, go with the lowest sum you are positive you will be able to put aside on a monthly basis. Car loans are to be paid off in up to 48 months.
You can apply for a car loan through a bank, credit union, or finance company. Just look for the loan that suits you particular circumstances best. Most people look for low interest rates first, but this is not necessarily the biggest benefit you can score.
Car loans can be secured or unsecured. Secured loans have lower interest rates but the car in question is the asset. If you default, the bank will repossess and sell the car. Since car prices go down in value as time goes by, if the sale doesn't cover your outstanding debt, you will still be liable for the shortfall. Unsecured loans have higher interest rates and are cannot be granted to just anyone. Check the prerequisites first if you are interested in this loan type.
As for interest rates, they can be variable or fixed. Variable rates are initially lower and can go either up or down, depending on the lender. Fixed rates are higher, but remain unchanged throughout the repayment process.
The usual vehicle finance mistakes are linked to buyers' unawareness. This is easily avoided - simply take care to inform yourself properly and you will know exactly what you need.
Firstly, make sure to negotiate the purchase price as opposed to monthly payments. You may well know how much money you can afford to allocate each month, but do not by any means share that information with the dealer.
Secondly, make sure you know your credit score. Funny as it sounds, most people usually think they have a lower credit score than they actually do.
Lastly, avoid add-ons at all costs. An extended warranty is nice and fine, but you can get it far cheaper through the finance institution of your choice rather than through the dealer. Remember that every add-on negotiated with the dealer spells commission for them. Did you know that nearly 30% of car sale profits is generated by finance and insurance?
Compare car loans and interest rates at Glimp today! Keep informed at all times and get the best out of the available offer. The car loan market is expanding all the time and is highly competitive as a result. There are more beneficial options available than meets the eye - you just need to be persistent while researching the options.
Albeit car loans remain the most popular way of financing a new car, that isn't to say that other options may not present themselves. On the contrary, the cheapest vehicle finance comes from other sources. Many car buyers decide on an overdraft rather than a new loan. Overdraft interest rates are higher than those of car loans, but the establishment fees are far lower. On top of that, overdrafts have one huge benefit: they allow you to pay off the car as fast as you like. The sooner you do it, the better you are off.
Further out, extending your mortgage (if you have one, that is) is also quite a sustainable auto finance solution. If you decide on this option, you will get to pay off the car at the mortgage interest rate, and these are known for being considerably lower than car interest rates.
Finally, using a low interest credit card can sometimes also be a good alternative to car loans. You only need transfer the balance to get a new introductory rate (these are by far lower than interest rates) for the next twelve months. After that, you could opt for transferring the remaining balance to a new bank, which would allow you to pay off the debt at below market rates. As good as this option may seem, keep in mind that not many dealers accept credit card payments.
If you decide on a car loan, make sure to read the fine print carefully. It contains information on all drawbacks as well as potential benefits. The most important thing to understand about a car loan - any car loan! - is that the sooner you pay it off, the more money you will get to keep. To that end, you will want to find a loan that includes the no early exit penalty feature. It will allow you to pay off your debt sooner without any additional costs.
Secondly, if you are willing to allocate more money to be on the safe side, you can opt for a loan repayment insurance. Finding a good one can prove to be tricky as not all lenders offer this option, and those who do select the buyers they deem qualified carefully. To be sure, loan repayment insurances are expensive, and especially premiums. On top of that, they are also subject to interest rates. Still, they offer the highest level of security you are about to find when deciding on a car loan. A loan repayment insurance guarantees your repayments to the lender even if things somehow go wrong. Even if you meet the initial requirements, though, you will still need an insurer.
Browse Glimp for additional information on best car loans and lowest interest rates and make sure to contact us with any questions you might have.
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