When you decide it’s time to replace your car, you will probably need to finance the purchase if you plan to buy a newer model. There are many ways to finance a loan from borrowing money from your parents to getting a bank loan. Here is some information that you can use about financing a car purchase.
Types of Lenders
Before you begin searching for a car, you should determine your budget and consider getting pre-approval for a loan. If your credit is good, then you should be able to get a car loan through most lenders, but if you’ve made some financial mistakes, then your loan options could be limited. Lenders that offer car loans include automobile dealerships, banks, and overdraft schemes.
Dealer financing can be convenient but the interest rates are usually higher than they are for bank loans. Depending on the price of the vehicle, you may be able to take out a personal loan instead of a bank car loan but your credit usually needs to be good for a bank loan. Overdraft loans will have even higher interest rates than car dealerships but you can pay the loan off as quickly as you wish.
Get the Best Rate
Loan interest rates can fluctuate quickly so you will want to check them while you’re shopping for a car, unless you find one quickly. Check the rates online by going to your bank’s website or you can find sites that check the rates for several lenders so you can avoid looking up multiple sites. A good interest rate can save hundreds of dollars in interest payments.
Ask About Fees
When speaking to lenders about a loan, ask them about all the fees they charge. Some lenders will charge extra fees for early loan repayments, fees for late payments, and a loan establishment fee. Compare these fees to find lenders who either don’t charge them or lenders who charge the lowest fee amounts.
Check for Repayment Insurance
Carefully read the contract before signing for a car loan as there could be hidden charges. One such charge is repayment insurance that guarantees that the car loan will be repaid if you die or lose your income due to an illness, accident, or layoff. Repayment insurance may not be necessary if you have life insurance and if it is included with the loan, you will not only pay a fee for it but interest as well.
Ask for Disclosure Statement
The easiest way to find out information about the lender’s fees and charges is to ask for a disclosure statement. By law, every lender is supposed to give you one upon request and it includes information about:
- Charges and f
- Interest rate charged.
- How interest is calculated.
- Results if loan payments are not made.
Always ask the lender to clarify information that you might not understand and don’t sign the loan agreement until you find out everything you want to know. By being proactive and asking questions, you could save yourself hundreds of dollars throughout the life of the loan.
