Car Loans, You Better Do Your Homework!
Debt Handling - Car Loans - Do Your HomeworkGetting a new car loan? Make Sure You Do Your Homework.
If you’re shopping for a new car and need a loan or if you’re considering refinancing your current auto loan, do some homework before you make your final choice. Most importantly don’t make the mistake I did when I bought my first new car. I thought I had a fixed rate loan, but it was adjustable, and it adjusted up to 13 percent interest.
First of all, know your FICO score, as well as your credit report itself intimately. Make sure that any incorrect items on your credit report are removed before you apply for a loan. It should be noted that many if not most credit reports contain some type of errors; the percentage of those with errors on them have been quoted as high as 60% or better.
Second of all, there are three major credit bureaus, and each has its own particular score. You should get a copy of each of the three and review them. These credit agencies and contact information are as follows:
Equifax: PO Box 740241, Atlanta, GA 30374; www.equifax.com
Experian: PO Box 2002, Allen TX 75013, www.experian.com
TransUnion: PO Box 2000, Chester, PA 19022; www.transunion.com
You should also know that you are allowed one credit report from each of the bureaus for free every year, although your credit score will not appear on these and you have to purchase your credit score from each of the bureaus separately. Nonetheless, it’s still not expensive to pull your current report at least once a year and check everything to make sure it’s accurate. To get your free credit report, go to annualcreditreport.com.
Next, look at the terms of your loan carefully. Even though that 0% loan and no money down may look attractive, do some number crunching to make sure that the terms will leave you with the least expensive loan possible when everything is said and done.
For example, if you take a $2,000 rebate on a three-year loan at 4%, you’ll save over $1100 on the total cost of the vehicle when compared to a 0% loan. Just make sure to run every scenario so that you come up with the lowest figure at the end of the loan term, instead of settling for that deceptively attractive interest rate.
Next, be sure you take care of financing before you shop for your car. This benefits you in a number of ways. First of all, you’ll know how much in advance the loan will cost you and what you can afford, which will help with your buying choices.
You’ll also be able to bargain most effectively with the dealer, since part of their purchase price is dependent on whether he or she will make the loan. Often times, dealers will accept a lower purchase price if you take their financing offered. Make sure you run various situations in advance so that you know where your trade-off amount starts.
It might be worth your while to accept their financing offer if their purchase price is low enough. This is because you can always refinance, even the next day after your purchase. This, too, is going to cost you some money, so make sure that the final figure you come up with after all adjustments is still your lowest.
Another advantage of prearranged financing is that you can walk away from any deal that’s not attractive enough for you. Basically, new cars are the same whether you go to the dealership across the street or across town. What differs are the service packages you can get at each, so this, too, should figure into your final consideration.
You can also consider alternative forms of financing, such as a home equity loan. This, in turn, can give you a source of cash where the interest is tax-deductible. Most home-equity loan contracts don’t require you to spend the money and the house.
Get as creative as you can when you are considering financing options to buy a car, because used properly, they can most definitely save you money.