Five things to know about car loans before getting a car loan

2019-04-09 Finance No comment

Most people who buy new or used cars from dealers choose to finance their purchases instead of paying cash in advance. Although this is economically significant for most people, making mistakes in negotiating auto loan terms will ultimately cause significant losses to the borrower. Here are five tips to help anyone deal with a car loan like a professional.

Credit reports sometimes contain errors.

People with lower credit scores usually pay higher loan rates, so anyone considering borrowing should be familiar with his or her credit report. Sometimes an error occurs. These errors should be fixed before meeting the lender. Some shoppers may even find dishonest lenders may try to claim that their score is lower than their actual score. Familiarity with these three reports can provide borrowers with additional negotiating capabilities that can save significant amounts of money in the long run.

2. Look around for the best deals on car loans.

While dealers typically promote low APR specials, these rates are usually reserved for the best credit borrowers. Many people find better terms in credit unions or online or community banks. If the borrower is prequalified at the bank, they will be more conducive to negotiations at the car dealership without being bound by any agreement with the bank. Extra tip: Any credit inquiry within the same two weeks will only be counted as one query when it affects the report.

Some lenders will use subprime mortgage borrowers.

Some dishonest lenders will provide high-interest loans to drivers with bad credit. Once the driver misses the payment, the dealer will confiscate the car and resell it. Default loans will cause additional damage to already bad credit, so borrowers should ensure that they can pay before they agree to the loan. Even borrowers of subprime mortgages should look around for the best annual interest rate. Car loan requirements are usually lower than mortgage requirements, so shoppers should check to make sure they get the best price.

4. Lowering monthly payments may actually cost more.

One strategy sometimes used for car loans is that dealers promote low monthly payments while hiding higher total purchases. Lower monthly payments also extend the terms of the contract, and longer loans usually have higher interest rates. Shoppers should ensure that the total purchase price is negotiated separately from APR and monthly payments.

5. Read the rules.

Before driving a new car, the shopper should ensure that the automated lending process is completed. If the lender indicates that the transaction is still pending after you leave, they may call later and ask for a higher annual interest rate or monthly payment, or request that the vehicle be returned to the location. The rules should also say that APR is fixed; otherwise, it may rise and may make payments unmanageable. In addition, some dealers will charge a fine if the borrower pays off the loan in advance.

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