A car, as we all know has graduated from being a mere luxury item to an indispensable need for any common man. Cars are necessary for commuting from home to office, shopping malls, school or anywhere for that matter. Post offices, courier companies and organizations cannot survive without a car or a van.
However, since purchasing a car is an expensive proposition you will surely be requiring an auto loan or a car loan for financing the purchase unless you have been saving for years together. Car finance can be got from dealerships, a bank as well as an online lender.
Components of a car loan
• Term: This refers to period of the loan or the number of months or years you will require to pay back the loan. It is in your best interest to accept a car loan from a financer who offers five years or less duration of car loan, as six years or higher car loans comes with higher interest payments.
• Interest rate: This refers to the percentage of the loan amount which the lender charges on you for your borrowing. The interest rate that you will be getting is partly based on your past credit record. You should know your annual percentage rate for comparing between lenders. This refers to your cumulative “finance charge” over a year including interest as well as any other fees.
• Down payment: This refers to the amount which you can instantly pay today. A heavier amount of down payment means less amount of loan you have got to carry forward, thus signifying lesser financial burden. Paying down payment of a minimum of 20% of your car’s buying price is highly recommended.
Tips for car loans
• Get a credit report: It is best to know your credit score before you start shopping for a car loan. A good credit score will provide you with a lower interest rate car loan.
• Opt for getting a loan from an online lender or a bank: You should try for securing finance from an online lender or a bank prior to negotiating with a car dealer. There is a better probability of getting good deals from a bank.
• Collect at least three quotes: You should shop around and get three quotes before you finally sign on a particular loan agreement.
• Read the finer prints: Get to know any hidden clauses like penalty charges associated with prepayment of the car loan or such other terms and conditions.
Getting a car loan with a poor credit history
Earlier a car buyer with a poor credit history had to face innumerable difficulties in the process of acquiring a loan. Same was the case with individuals having no credit history. Most auto finance companies hesitated to provide loans to these individuals. However, things have changed today on account of the competitive marketplace where lenders are going out of their ways to offer bad credit loans, albeit at a higher interest rate. Having a cosigner can also sometimes help to reduce interest rates.