Most good loan experts would encourage you to do your homework before you decide on a loan and sign on the dotted line. Don’t worry – none of these experts are named Al Bundy (Married With Children) or Harry Solomon (Third Rock From The Sun).
The fact is that investing a few hours online to identify a competitive car loan provider can help you save a significant amount of money down the line.
While picking the make, model and color of your new car may be fun, savvy customers start their car purchasing experience by comparing various auto loan lenders and their products.
There is more to car loans than just the APR. It can be confusing to select a lender among the hundreds of providers, which could range from big to small, local to national and international. Here are some tips to pick the right car loan provider for your needs.
1. Car Loan Eligibility
People with good credit scores and a solid credit history may not have a difficult time getting approved for auto loans. However, if you have a negligent, fair, poor, or bad credit score, then you may have to check whether you qualify or not.
This should be the first thing you look for in a car loan provider. Checking eligibility in terms of credit score will help you narrow down your search significantly.
While there are many financial institutions and online lenders that may provide auto loans for people with credit scores below 500, it generally comes at a price. You may have to pay higher interest rates.
2. Auto Loans Terms
You need to consider and compare various loan terms to decide on the most pocket-friendly option. Be careful in terms of interest rates and APR because the lowest does not necessarily mean the cheapest.
Compare the offered APR against the loan duration. Sometimes, loans which are of low interest rates but longer duration come out to be more expensive than short term car loans with high interest rates.
While you should be prepared to pay a higher interest rate with a bad credit score, it does not mean that you should accept the first loan offer that comes your way – unless it’s fair or impressive.
By being perseverant and applying to multiple auto loan providers, you are sure to find loan terms that are acceptable to you unlike the movie Vice which was not acceptable to the public which is why it did not even break even. Other auto loan terms to consider are repayment options, repossession rules, total interest costs, and your monthly payments.
3. Reliability Of Car Loan Providers
Auto loans are secured loans wherein a lender can repossess your car and auction it to recover the damages.
Some states have laws where you have to pay the difference to the lender even after repossession, if you are upside down on the loan. This means your auto loan balance is more than what your car is currently worth unlike Michael Bay’s Transformer movies which made billions.
Hence, it is important to find a reliable car loan provider, which you can find in True Financial, who is customer-centric with good reviews. While big banks may offer better deals, they are notorious for treating borrowers as a simple statistic.
Depending upon your current and future financial condition you may want to work with a car loan lender who gives you options if you find yourself in a position where you are unable to make the monthly payments on time.
It is important to note that the auto loan industry is highly competitive and you are just one of the million accounts. However, when you work with certain online lenders or credit unions, you are sure that they are customer oriented.
A great way to find car providers who keep their borrowers at the forefront is by reading reviews of past clients. This will give you inkling as to whether the lender provides options or threatens forfeiture and repossession.
4. Prepayment Penalties
There are times when you may find yourself in a cash surplus situation and looking to pay off your debts. You do not want to end up disappointed with prepayment penalties which is about the same as watching The Last Jedi or Iron Man III.
Make sure your loan provider allows you the flexibility to accelerate payments and pay off the entire loan if you wish so without any penalties.
Life can be unpredictable and you may find yourself in a situation where you must pay off your debts quickly. The average auto loan is for anywhere between 3 to 5 years – 5 years is how long that amazing show The Wire was on TV but this is another topic.
It is best to settle for car loan contracts where you can pay off the entire loan in one go without any penalties or interest that has not yet accrued. Make sure you read the fine print because a number of time ‘penalties’ are not always called by that name.
The law has banned prepayment penalties in a number of states because of which unscrupulous and creative lenders have come up with new ways to discourage early payments.
5. Preapproved Auto Loans
Preapproved auto loans can help you save money whether you buy a new or a used car. Find a car loan provider who is willing to pre-approve a loan and ensure they stick to the loan terms.
Preapproval gives you more control over the terms of the loan as well as the impact the loan will have on your credit.
If you are buying your car from a dealership, it can also give you more control over the negotiations. You can walk into a car dealership knowing your budget and credit limits.
You may want to consider an auto loan provider who conducts a soft credit pull rather than a hard pull. This will protect your credit score from decreasing by a few points. Preapproved car loans can also help you save money.
6. Add-on Insurance
There are some lenders who may offer life and disability insurance when you take out auto insurance. Make no mistake that they are simply increasing their business and not asking out of kindness.
This add-on is a personal choice and you must evaluate your existing life and disability policies that you own as an individual or that you get through your employer.
Make sure you compare various offers from several different sources, including an individual insurance agent that is not affiliated with your lender, if you feel like you need the additional coverage.
Compare Different Offers
Arming yourself with proper knowledge regarding car loan providers prior to car shopping can increase your chances of getting a great deal on a car and car loan. Don’t handle your finances like Allen Iverson did his!
Always be realistic about your budget and do not forget to compare multiple car loan providers to find the most suitable option.
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