Car Loans - Important Things to Know
Key things to remember when getting a Car Loan
When you are considering a car loan, you will want to keep some key things in mind. For instance, sometimes you are in a situation where you can pay off your loan early, which is a wonderful thing. Make sure that you will not be penalized for this. Its a great thing to be able to avoid that extra interest if you can. The lender loses out however, and may have built in charges for an early pay off of their loan to you. So ask about this up front. You don't want any surprises.
Avoid adjustable rate loans. Adjustable rate loans may look nice in the beginning, but can really clean out your wallet later on. The initial APR can be very low and very attractive. Time goes by, you are busy, and the next thing you know, that loan "adjusted" and you are paying much more over time. Some people still take this route, but if you do, try to find out how high that rate can climb to. If its a very large number, then you can bet it might go there and you have to abide by it. Ask for the limit, so you are at least in the "know."
Subject to Approvals, and First time Buyers Financing
Avoid the "subject to approval" types of loans. What happens here, is that you can get into your car, and take it home, only to find out that later your loan fell through. Then they will offer you a rate that has a higher interest, but now you have the car and will likely feel "stuck." It is not a good idea to be a part of this. Unfortunately some very "nice but slimey" sales tactics are out there and can get you hooked in. Again, time goes by, and you need your car to get to work, etc. You feel stuck and just say, "ok...what else can I do?" The better thing to do is avoid in the first place, or at least learn from the mistake if it happens to you.
Avoid first time buyer financing, unless you just have really poor credit and have no other choices. It sounds like a great deal and something you can only "take advantage of once!" The thing is, that very often you can get a much lower interest rate than the general or plain financing that can be done. Make sure to shop around. To be fair here, you can sometimes find first time buyer programs that are offered to recent college graduates. Sometimes these ones really are a better deal. It is definitely something to ask about if you are newly out of college.
Monthly Payments and 0-0-0 "Deals"
We all have hear the advertisements about $0.00 down, 0% interest and zero payments for the first year commercials. That sounds just wonderful, and can be very enticing. Just be very wary of such deals, and know that that first year comes around very quickly! The reality can really set in after one year hits. Often, you will now need to pay all the payments that were postponed and sometimes with an interest that you either forgot about or thought they said wouldn't exist! The regular payments are set in motion, and their interest is much much higher than the 0% you started at. It was already a bad idea to put $0.00 down, and now you likely didn't save up on the months you didn't pay to cover what you need to pay now. This can really hurt, and cause you to fall behind and pay late fees, etc. Just avoid this altogether.
Your monthly payments might seem to be your key concern, but keep in mind that the dragging out a loan for a longer time, in order to "save money" per month now, will cause you to pay much much more in the long run. You might have been able to get an incredible car, but be paying for it for many years to come! Nobody wants that, and especially when cars depreciate the way they do.
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