Auto Loans

5 Simple car buying tips

Buying a car isn’t something you do everyday. It is a tedious process that takes a lot of time, patience, and money. In order for you to get the best deal on your and potentially save a lot of money, you should adhere to the following tips.

Tip 1. Review your credit - The worst thing you want to do is buy a car with a bad credit score. Before you decide to buy your car, make sure you get a copy of your credit report. If you have a high enough credit score, you might qualify for special dealer incentives and lower interest rates. If your credit score isn’t up to par you should take a few months to improve your credit score. The money you will save by buying with a higher credit score is worth waiting a few months. Someone with excellent credit, a score ranging from 720-850 can get a car loan for as little as 5.1% APR. In contrast, someone with the absolute worst credit score of 500-589 can pay as much as 15.8% in APR.

Tip 2. Purchase a used car - Yes it’s true, the unique smell of a brand new car is very aromatic. But, at the same time, you can save a whole bunch of money by simply buying a used car. When I talk about a used car, I’m not talking about some old beat-up clunker. I’m talking about a car that’s barely used; a car that almost new. You can save a lot of money by simply buying a car that’s a few months to a year old. As soon as a car is driven off the lot, it loses money. Be smart and purchase a car that is used.

Tip 3. Get a CARFAX history report - It is important to check out a car’s history. Nowadays, most dealers will include a free CARFAX history report for the car you’re buying. If a free history report isn’t included, don’t be cheap. Pay the $20 fee and order your CARFAX history report. In the CARFAX report, you will find valuable information about the car you’re about to purchase, such as: number of owners, its recent locations, accident reports, and “lemon” indicators. The last thing you want to do is purchase a flood vehicle.

Tip 4. Get a good loan - The best way to purchase a car is with cash. If you’re like the majority of car buyers, you will have to take out a loan. Look around the internet for a good loan. There are thousands of banks, online lenders, and credit unions that are willing and ready to give you the loan you need to purchase your car. Visit sites like Bankrate.com to find lenders and their rates. Once you’ve found a good deal, always make sure to put down as much money as possible and to choose the shortest loan period. You don’t want to pay for a car for the next five years. Once you’ve been approved, take the paper work to the car dealership. The rates you get from a bank or online lender is almost always lower than that you would’ve received from the dealer’s financing office.

Tip 5. Research! - With the internet on your side, you have no excuse for not negotiating and getting a good deal. Before you step foot inside a dealership, make sure you have done your research. Find out the car’s MSRP, Kelly Blue Book price, and its other details. When you go to the dealership, make sure you bring this information along with you. Car salesman will often try to get the most money out of a buyer simply because they go unprepared to bargain.

Remember to use these tips the next time you purchase a car and you will save hundreds, if not thousands of dollars on your next car.

Auto Loans

Bad credit auto loans

Bad credit auto loans are loans for individuals who have bad credit. If your credit is not up to par, your best chance of obtaining a auto loan is by apply for a bad credit auto loan. Bad credit auto loans are not bad, they simply are not the best option.

These bad credit auto loans resemble the traditional auto loans. The only difference is that the bad credit auto loans usually carry a higher interest rate. The difference in interest rates between bad credit auto loans and traditional auto loans can be as high as 10%.

A person with perfect credit can get a loan with a 5.1% interest rate. That figure jumps to as much as 15.8% if the same person has bad credit.

A good thing to do before applying for a bad credit auto loan is to check your credit report. Make sure that your credit report is free of errors. A higher FICO score plays a major role in determining your interest rate. Before applying for a bad credit auto loan, check your FICO score and try to improve it.

If you cannot do anything to improve your score and are forced to apply for a bad credit auto loan, make sure that you pay the balance of your loan as soon as possible. The longer you stay paying the balance, the more you will end up paying in interest fees.

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Tips on getting the best auto loans

How many times have you heard someone say, “Wow, I got a great deal on my auto loan”? Rarely, if ever, right? People don’t brag about their auto loans, usually they consider it similar to highway robbery. But there are some things that can help you get a much better deal, and give you something to brag about.

Before the Auto Loan

The best time to buy a car is the end of each month. If there are promotions for the salesmen, they are anxious to get sales, and will work with you to purchase the car you want, sometimes at insane prices, just to get the sale. Also, don’t be in a hurry to buy. Look around; check online to see what the price and interest rates should be. Be patient.

Facing the Auto Loan Manager

You can negotiate your interest and payments, you don’t have to take the first offer. Never tell them how much you can pay per month, because they will build an auto loan around that amount and you will lose your power to negotiate. Your interest and payments are based on your credit report (a history of your credit details) and your credit score (a number that tells how you rate against peers).

If you have good credit and a high score, you can drop a few percentage points off of the standard auto loan. There are special incentives sometimes with very low percentages that are worth taking advantage of, but make sure it is not a lease option or a high down payment.

Auto Loans Online

Auto loans offered at banks and websites often will have better interest rates. At lendingtree.com you submit your loan information and within 24 hours several companies will contact you with interest rates and payment options, all competing for your business. Sometimes they offer better rates than the dealer financing. If you have a loan with higher interest rates, refinancing online may save you money. Check with your bank or credit union as well to see if they can offer a competitive rate for members.

Finalizing the Auto Loan

When you go determine who you will borrow from, ask the following questions. What company is the auto loan with? What is the mailing address to send payments to. What happens if you default on your loan? Is there a grace period? Is there a prepayment penalty? What other expenses are included in the loan? What if your car is totaled or is repossessed? Who holds the title, you or the lender?

Budgeting Auto Loans

Using a simple budget, determine how much you will be able to spend, then make sure that you don’t go higher when you settle on a loan. Increasing your down payment will help your payments decrease, as will getting a longer loan. You can go out 60 months to get a lower payment, but you will be paying more in interest, and it will take that much longer to own the car outright.

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Auto loan terms and definitions that you must know

Before you run out and try to get an auto bank loan you need to take the time to learn what the different terms are that you will likely hear, as well as taking the time to understand what they mean. The following article contains some of the terms that you might come across. This article is not intended to teach you every term that might come up when you are shopping for an auto loan, it is just a starting place.

If you wish to know more about any of these words or to find more words regarding getting an auto bank loan, you can search for an auto bank loan, finance, or leasing glossary on the Internet.

Auto Loan Financing Terms:

- APR: the rate you will be charged for the privilege of using the finance company’s money; also know as Annual Percentage Rate, Interest Rate, Loan Rate

- Lien: A claim upon the vehicle for the payment or satisfaction of the debt.

- Loan Term: the amount of time you have to pay back the loan

- Term Loan: loan that is paid back in a lump sum when the loan term ends

Leasing Terms

- Capitalized Cost: selling price of vehicle, options, insurance, warranties, and rust-proofing or other add-ons; value of vehicle at the beginning of the lease

- Captive Finance Company: the auto manufacturer’s (GMAC, Ford, Chrysler, etc.) financing companies

- Closed End Lease: lease that allows you to return the vehicle when the lease term is up; you can buy the vehicle at the residual value but are not obligated to

- Disposition Fee: the fee you will pay for the dealer to “dispose” of your trade-in vehicle

- Early Termination Charges: the fees you will pay if you turn your vehicle in before the end of the lease term

- Excess Wear and Tear: damage or wear on the vehicle that is beyond normal wear and tear; make sure you read your lease carefully to find out exactly what the dealer’s standards of excess wear and tear are

- Excess Mileage Charge: fee you will pay if the mileage on your leased vehicle exceeds what was specified in the lease agreement

- Gap (Gap Insurance): insurance that will pay off the leasing company your car is stolen or totaled during the term of the lease; When a car is stolen or totaled during the term of a lease the lease becomes an early termination. When you have Gap Insurance it will pay the leasing company.

- Lease Term: length of the lease contract

- Lessee: you

- Lessor: the finance company

- Residual Value: value of vehicle at the end of the lease

Other Terms

- Acceleration Clause: a clause that lets the lender speed up the rate at which the loan comes due

- Extended Warranty: a contract that will cover the repairs on a car after the manufacturer’s or dealer’s warranty expires

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Auto loans and bad credit

It seems that in today’s society, anyone is eligible for auto loans. There are various loan programs available for people with good credit, as everyone is well aware of. There are also loan programs for those who fit in the no credit, poor and bad credit categories. The online advertisements claim that those who have had such experiences as bankruptcies, collections, foreclosures, slow payment patterns, and repossessions even have a chance to apply for an auto loan.

The advertisements preach about second chances and all individuals deserving to drive decent cars. Those who have been denied credit or certain ways of living because of past credit history do deserve the chance to drive a nice, dependable car, but the reality is that they are not always trusted with auto loans. To hear that there are loan programs out there is refreshing but what does applying for an auto loan entail for these individuals?

Is the process more trouble than it’s worth?

The Application Process for Bad Credit Auto Loans

For those with not so favorable credit histories, most auto loan programs offer different applications for the individuals with a favorable credit history. These applications are called “bad credit auto loan” applications. If going through an online application process, it seems the questions are basically the same as those that are on applications for the “good credit” people. Such questions include rental amount paid per month, thorough current employer information and other income.

This particular information is most likely useful in the auto loan application processing as the creditor begins an employer and credit check process to determine whether an application will be approved. Then, maybe a day or so later the applicant receives phone calls from a representative of the loan program to work out a sale, basically. So, it does not sound so bad does it?

Different Rates and Such for Bad Credit Auto Loans

How bad the experience of applying for an auto loan turns all depends on the lending program and the person’s circumstance. Some things to consider include the fact that the interest rates will end up being much higher for the applicant with the unfavorable credit history. Requirements for qualifying for some loan programs include being at least 18 years of age, and having a particular minimum gross income amount, for instance such as bringing in at least $1,500 per month from a job.

Other requirements include having had bankruptcies discharged, in addition to having no repossessions within the last year of the application being processed. It would also be wise to have some cash available for a nice down payment, to further guarantee the money is there available for monthly payments on the loan. So in the end, the process for obtaining an auto loan may be worth it.

So do not let past treatment from other creditors keep you from pursuing an auto loan. There are creditors out there who say they care and would like to work with you, so give them a chance to do so. if it does not feel right, and seems like it more trouble than it is worth, then go with your heart and search somewhere else. There is always another solution.

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Auto loan options

If you are considering taking out an auto loan, the first place you will likely look is at the dealership for the car you are considering. Dealership auto loans are convenient because you can take care of the paper work and leave with the car in one move, rather that getting the money from another institution, settling the paper work there and then going to the dealership separately.

Unfortunately, dealership auto loans are usually not very competitive, and you have the added pressure of dealing with a salesman whose entire job is to get as much money out of you as possible. In addition, many loans from dealerships are front-loaded loans, which means you will pay more interest early on. So, if you plan on paying off your auto loan quickly, this is not the best deal you can find.
An Auto Loan from a Bank/Credit Union

Another option is to go to your bank or credit union (if you are a member). They usually have more competitive rates for auto loans, and are there for you, rather than for the car. Representatives also tend to have knowledge on the subject, and can advise you regarding the amount you are paying. Finally, auto loans from these financial institutions are usually simple interest loans, spreading the interest out evenly over the course of the loan.
Using a Home Equity Loan As an Auto Loan

If you are a home owner, you can take out a home equity loan, and use the money to buy your car. Tax deductions can be made on some of the interest you pay, and you can usually get very competitive rates. You are, however, putting your house on the line should you fail to pay back your loan. So, make sure you are confident in your financial situation before you take this risk.
Online Auto Loan Options

Online you can find many financial institutions that will offer you an auto loan. The most important factor if you choose this option is to remember to check into the company you are using. There are many scams online, so check the Better Business Bureau to make sure the company is legitimate. While there is little to no personal contact, benefits of online financial institutions include that they are quick and easy, as well as competitive.
Personal Loans as Auto Loans

One final option for your auto loan is to borrow the money from a friend. You benefit from being able to negotiate a deal and not having to deal with some impersonal stranger at a company. You usually also get very competitive interest rates, or even no interest at all. However, this is also a risky choice. Borrowing money can be very detrimental to relationships, especially if you have trouble paying it back.

If you are at all concerned that you will not be able to meet the payments, you should not get involved with such a loan. You will not only be in debt with someone, you might just ruin your friendship with them.

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3 Ways to get an auto loan

Auto Loans can be obtained in several ways. The first option is to go to a local auto dealership and select a car. Most dealerships will offer an auto loan through their finance company. Many major automobile manufacturers have their own finance programs which you can apply to. While at the dealership, the on-site loan specialist will help you complete the process of getting your auto loan.

You can also go to a local bank and apply for an auto loan through them. To do this you need to go to your bank, sit down with one of their loan specialists, and they will talk you through the process of applying for a loan. An auto loan through your bank means that you can have automatic payments and often will give you a lower interest rate.

Many banks, if you have a checking account with them, can arrange it so your auto loan payment is automatically deducted from your checking account on a specified date each month. The disadvantage to using this method is that you may have funds withdrawn from your account when it is too low, incurring overdraft fees.

A third source for auto loans is on the internet. There are thousands of sites that you can access that will allow you to apply for an auto loan. Many of these sites will have reduced rates in order to generate more business. It also means that you do not get to interact personally with someone when applying for your loan.

What Do I Need to Get an Auto Loan?

Be prepared by having several forms of identification on hand. You should also have contact information for your employer, as well as several references. If you have poor credit, you may have to find a cosigner before hand, as many loan companies will request you have one if your credit is under their standards.

You should also have an idea of how much money you’ll need to borrow, and what interest rate you can afford. Check your budget before applying for an auto loan so you’ll know what monthly payments you can afford.

How Does an Auto Loan Work?

Once you have received your loan, you will be able to buy your car. If you received your loan from a bank or online company, then you will have to submit information on the car including the make, model and VIN number, to the company. Your automobile will then be used as collateral against your loan. This means that if you fail to pay your loan, the company that you have your loan through will repossess your automobile.

If you continue to miss your loan payments, they will auction off your vehicle and apply whatever funds they get from the auction towards what you owe. You will then still owe with the balance. Careful planning, including realistic assessment of your budget, will ensure a successful auto loan experience.

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How to lower your auto loan rate

The best way to secure a low auto loan rate is to have good credit. This will not only help you get a loan in the first place, but will also lower the interest rate you receive. By having good credit, you are demonstrating to the lender that you are responsible, and not a liability. They will not want to give you any of their money if they think you will not pay it back! So, give them nothing to worry about, make them feel safe, and they will make you feel safe in return!

If you are unsure of your credit rating, try finding an online credit report. You can get a copy of your credit report by ordering it from one of the 3 credit bureaus. If you prefer not to pay, you can get a free copy of your report by visiting www.annualcreditreport.com and ordering your free report. This is the first step in knowing what your credit score is, and will allow you to decide how to proceed from here.

If you have a poor credit rating, do your best to increase it before you apply for an auto loan. Try paying off a few of your debts, make sure you make your monthly payments on whatever you cannot pay off. Once you have raised your credit score, you will find that a lower rate is just on the horizon.

The next step to getting a better auto loan rate is applying a larger down payment. The more you pay up front, the less you have to borrow. Many lenders will lower their rates for those that are borrowing less, as once again, it is a smaller risk for them. It is much easier to pay off a ten thousand dollar debt than it is to pay a twenty thousand dollar debt! The less you have to borrow, the better of you will be.

Not only will you pay less interest, but you may be able to secure a shorter term, meaning you also make less payments (hence even less interest! ). If you do not want a shorter term, by paying a larger down payment you will at least decrease your monthly payments by a large percentage!

Finally, the last step to reducing your auto loan rate is to refinance. If you already have an auto loan, but are paying high interest because of bad credit, refinancing may be the option for you. If you have increased your credit score, or taken care of whatever caused your high rate to begin with, you can refinance and seek a better rate. Try searching online, or talking to a local banker to find more information on refinancing. The experts will be able to tell you, after a brief discussion, whether you will be able to lower your current interest rate or not. Good luck!