Car Loan Financing - Finding A Good Lender
When purchasing a new vehicle, most people don't have enough
funds to pay cash and must obtain car loan financing. After
deciding which type of car to buy, the next important step is
finding a good lender. While you may have no problem qualifying
for car loan financing, it is important to shop around before
deciding upon a lender. You can do this by either visiting local
banks in your area or by researching car loan financing offers
online.
If you have good credit, you may even want to decide upon a
lender before visiting the car dealership. This way you can get
pre-approved for a set amount of cash. Once you have been
preapproved, you know how much you have to spend. You won't be
as tempted to look at cars that are out of your price range. If
dealers know you have already been approved for a loan, they may
be more willing to negotiate a deal. Since most salespeople work
on commission, they will do their best to accommodate someone
who has already been approved for a loan.
Down Payment and Interest Rates
Your initial down payment will affect what type of car loan
financing you receive. The greater your down payment, the lower
rate of interest you can expect to be offered. Auto lenders will
consider you less of a risk if you invest more in the vehicle
upfront. It may be very tempting to apply for car loan financing
while a dealership has a "no money down" offer, but you should
be aware that the interest rate terms might be much higher.
Length of Payment Terms
Until recently the longest term for car loan financing was sixty
months. Today dealers have started to offer extended payments
plans of seventy-two and eighty-four months. This has caused
consumers to purchase more expensive vehicles, cars that would
generally be out of their price range.
While you may dream of buying a $40,000 dollar SUV, it is
probably not a good idea unless you can pay for it within a five
year time frame. Remember that once the warranty period is over,
you are responsible for all repairs. People who finance their
cars over a seven-year period often end up owing more on the car
than it is actually worth.
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Best Car Loan Rates - Prime Lenders vs. Sub Prime Auto Lenders
The best car loan rates are out there if you search for them.
Based on your credit past, you may find either a prime or sub
prime auto lender is your best choice. The surest way to find
the answer is to request free online loan quotes to narrow your
choices.
The Differences Between Prime and Sub Prime Lenders
Prime and sub prime lenders differ in the types of loans they
offer. Prime lenders offer A loans to those with credit scores
of 650 or higher. Sub prime lenders provide loans to everyone
else. Sometimes though, financing companies offer both types of
financing.
Sub prime loans have higher rates and fees since the risk is
higher for lenders. Reasonable lenders will only charge a couple
of points higher for most types of loans.
Who Has The Best Rates?
The only way to find who has the best rates is to do your own
comparison shopping. Depending on your credit score, you may be
surprised who can offer you the most competitive package.
As important as low rates are, fees should also be considered.
Fortunately the government made comparison shopping easy by
requiring lenders to disclose the APR of any loan. The APR
includes both closing costs and rates.
Find The Right Lender
You should start your car loan shopping online, not at the
dealership. There are too many incentives for the salespeople
for you to be sure you are getting the best deal.
Start with a car loan broker site that brings many lenders
together. You can quickly access free quotes from there. Then
follow up with other lenders.
And don't give permission for a lender to access your credit
report unless you are pretty sure you want to go with their
offer. Otherwise, you will find that multiple credit inquires
will lower your score and hurt your loan application.
While there are no instant solutions to finding the best auto
loan rates, online sites do make it faster. A couple of hours
spent securing your vehicle financing will both save you money
and make the car buying process easier.
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Bad Credit Automobile Loans - Tips On Finding A Good Lender
Much like the bad credit home loan market, the bad credit
automobile loan market is a crowded and competitive arena. If
you find yourself in the position of needing a bad credit
automobile loan use caution in selecting your lender. While most
lenders dealing in the bad credit car loan sector are honest,
there are those who skirt the law with predatory loan practices.
Knowledge is the best defense against these dishonest loan
agents. Know more about your own credit than the lenders do. Arm
yourself with a recent credit report and FICO score. If a lender
says he has different information about your credit than you do,
ask him for his sources. If at all possible deal with a
financial institution where you already have a banking
relationship. Many banks and credit unions will help you apply
for "second chance" programs. They know that when they help
their customers in the short run they will retain the business
of those customers in the long run.
Be Careful With Who You Apply With - Be extremely cautious when
responding to any solicitations from bad credit lenders no
matter how those solicitations are received. Do not give any
sensitive personal information to a lender until you have
checked the company out with the Better Business Bureau. The
best course of action is to initiate contact with a lender
yourself from a list you have compiled through the Better
Business Bureau and personal references. Don't be embarrassed by
the fact that you are having to inquire about a bad credit
automobile loan. Many lenders make more money off of their bad
credit customers than off of their more credit worthy customers.
Find out the current interest rates - Interest rates fluctuate
from day to day, so check them often. Depending upon the state
of your credit you can expect to pay from as little as 2% above
the average rate to as much as 17% above the average rate. Rates
above this are in many cases illegal. Watch out for lenders who
charge the legal rates but tack on an assortment of finance
charges and prepayment penalties.
Research The Price of Your Car - When you have narrowed down
your car choices, research the value of the different models.
The price of a car being financed with a bad credit loan may be
a little higher than the same car for a good credit loan,
however, the difference should only be a few hundred dollars not
a few thousand dollars. You can become trapped in loan if the
dealer inflates the price to the point where the car is financed
for more than it is worth. Just as you will shop for your car,
shop for your lender and let all of them know that you are
talking with more than one company. If you think a lender can do
better, state your case and ask for different terms.
Any reputable lender will put its proposals in writing with all
the blanks filled in. Further, you should always be allowed
ample time to read all of the loan documents. Walk away from any
lender who pushes you to sign something that you haven't had
time to read. There are compromises you will have to make
because you need to obtain a bad credit auto loan. These
compromises don't include being taken advantage of by a
predatory lender. A bad credit auto loan should be a stepping
stone to reestablishing your credit not a trap that may result
in additional credit difficulties.
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Items covered in this section:
Get the cheap, low interest auto loan that you need. Improve your credit history with auto
loan
on-time payments. Get great deals on auto loans with the best lending institutions
available. Lower the monthly payments on your auto loan. Get a low interest auto loan. Find the
best alternative lending institutions. How to get finance companies to lend you money at the
best possible rates.
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