Things to Know Before you get an Auto Loan
Things to Know Before you get an Auto Loan
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.
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.
Know How Much You Can Spend
Responsible budgeters already know this, but a lot of people are too busy these days and don't stay on top of their finances like they should. 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.
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.
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.
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. Check with a credit union, bank, online lender, or P2P lending source. 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.
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".