Acquire an Auto Loan
When considering the purchase of a new auto, many of us simply do not have cash lying around to pay for it. Therefore, an auto loan becomes a necessity.
Contents
Steps
- Remember: credit unions - If you are a member of a credit union, you will be able to apply for a larger auto loan with a smaller interest rate than at some other institutions. Be sure to check with your credit union to see what types of financing they offer for auto loans.
- Remember this:auto dealers - It is much easier to secure an auto loan through an auto dealer than by other conventional methods. This type of auto loan has rates as competitive as other types, is processed more quickly, and approval rates are high. Also, Dealer financing typically gives you more options for financing (such as longer terms for lower payments), and may offer you very attractive options for extended warranties, credit life insurance, credit disability insurance, Gap protection, and more.
- Keep in mind by offering your home as collateral, you will be able to secure an auto loan. Although this type of auto loan carries with it the potential for a higher interest rate, there are some tax advantages that can offset the costs incurred by the higher interest rate.
Tips
- Short-term - These auto loans have higher monthly payments, but over the life of the loan you will end up paying less, and will probably also be offered a lower interest rate than that which is available with a long-term auto loan.
- Long-term - These auto loans are usually only offered for high-end vehicles (financing more than $20,000 as a minimum, but more common are amounts of over $30,000), and typically last for terms of 60 to 84 months (5 to 7 years).
- Dealer Loans - Dealers are offered incentives to provide you a loan through their bank. Like GMAC etc. Usually the dealership is making 1/2% of the loan rate for sending you to their own credit agency. You can use this to your advantage, after the salesperson has run a check and you are a good credit risk they will want to actively sell you a car. If you strike a deal and you are getting close to your price you can usually wrangle another $500.00 off if you are using their creditor as they are not losing any money.
- Standard-term - These auto loans are usually only offered with the purchase of a new car, and typically last for a term of either 36, 48 or 60 months. This type of auto loan features a smaller monthly payment, but you will end up paying more over the life of the loan. One problem that can arise when having a standard-term auto loan is that the value of the car may fall below what you actually have left to pay on the loan.
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