What You Want In A Car Loan
Print View - Published: Thu, 3 Sep 2009 at 1:28 PM
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Unless you're independently wealthy the odds are that you'll eventually need to borrow money at some point to buy a new (or used) car. Lenders come in all shapes and sizes for car buyers, from straight banks to credit unions, dealership financing and a variety of less common sources; so here are a few things to consider and look for when taking out a loan for your next vehicle purchase.
What's The Interest Rate?
Often, the easier loans to get approval for will come with the highest interest rates, so it's in your own best interest to shop around and start with banks or credit unions. They will typically offer the best rates for the life of the loan, and have the more strict regulations to protect consumers and borrowers.
Are There Additional Fees and Charges?
Once you get away from standard financial institutions you may run into more fees and charges, sometimes even annual charges, just for the privilege of borrowing money and paying higher interest rates. Unfortunately, being the safer option, banks tend to also be the hardest to get a car loan with unless your credit score is very high, so if you have to go with someone other than a bank or credit union, do your due diligence and make sure your aware of the fees and charges that you're going to be accountable for up front.
Are There Any PrePayment Penalties?
This is another area where 3rd party lenders often take advantage of borrowers. Suppose you take out a 5 year line of credit but get a job promotion that allows you to pay it off in 3 years, by most accounts this should mean a savings to you in finance and interest fees, however some lenders include prepayment penalties into their loans to prevent you from saving money by paying off the loan early.
Now, a majority of people won't ever attempt to prepay a loan anyway, but there is always the chance that your financial status will improve and you'll be in a position to pay a loan off early, so it's wise to know up front whether or not doing so will cost you anything in penalties or fees.
Like shopping for anything major, when you're in the market for a car loan it's simply smart to look around for the best deal available to you, and be informed about the options and stipulations attached to each deal before signing on the dotted line.
About the Author
What to look for, and watch out for, when you're in the market for a car loan
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