According to the New York Federal Reserve, 6 million Americans are 90 days late on their car loan payments. These serious delinquencies could lead to a major financial crisis. Car owners may be in danger of having their cars repossessed. To avoid this, buyers should be able to afford their car loan payments. One of the things car buyers can do to get a great car deal is to check their credit scores with the 3 major credit unions, as good credit scores generally help car buyers qualify for better interest rates.
Conducting comprehensive research is also important to get great car loan deals. Here are some of the must-dos:
*Shop Around for the Best Loan Rate
Getting a good deal on your new car is just the first step; you need to look around for the best loan rate too. Some people get too excited about the new car and they don’t realize that it has to be paid back. Remember that you will need to face the consequences if you don’t pay back your loan — you may lose your car and affect your good credit standing at the same time.
You may need to apply to multiple lenders to get the best deal. Carefully go over the details of each financing offer and weigh the pros and cons before deciding on which lender to go with.
*Read the Fine Print
Your car loan is an agreement that last years; it’s essential that you know what’s exactly in it. Before you sign the agreement, make sure you fully understand everything you’re getting yourself into. There are a couple of things that you need to watch out for:
Variable interest rates. This is an interest rate that fluctuates over time. It may rise or fall irregularly. Figure out the highest amount and see if you can afford it. If it isn’t affordable, the loan may not be for you.
Late payment and prepayment penalties. Find out the fees for late payments or how much it will cost if you decide to pay off your car loan early.
Make sure that everything promised by the lender is stated in the agreement. If there’s something missing, clarify it with the lender. Don’t sign anything until everything is in the fine print.
*Take Out a Shorter Loan
As much as possible, it should be four years or less. Never go beyond a 5 or a 6-year loan term. Otherwise, you’ll be paying more for the car as interest rates are higher for longer-term loans. The reduced monthly payment may sound attractive at first, but you’re actually paying more in the long run. If you can, go with two years, so you can pay off the loan early.
*Consider the Total Price, Not the Monthly Payment
Some people think that a reduced monthly payment means a good deal. That’s a mistake you should avoid. Unless you look at the total price of the car, you won’t really know how much you’re being charged for it. Go for the highest monthly amount you can afford in the shortest possible term. This will greatly reduce the total amount you will be paying for your car loan.
*Beware of the Spot Delivery Scam
It’s best to investigate your lender before making a financing agreement with them. This will help you avoid dealing with a spot delivery scam or also known as a yo-yo finance scam. Never sign all the paperwork and take home the new car assuming the financing has been approved. Otherwise, you may end up paying higher interest rates.
Apart from doing your research, it’s important to a get a pre-approved loan first to avoid the hassle of negotiating interest rates. This way you can just concentrate on getting the lowest price for your new car.