Do Your Homework Before Heading to the Dealership

by John Stevenson on April 23, 2014

Financial institutions advertise auto loans with affordable monthly payments, flexible repayment terms, and competitive interest rates. There are different options for customers, including leasing and buying a vehicle

spedometer1Bank customers are offered financing for the purchase of motor homes, sports vehicles, cars, campers, and RVs. Customers who want to secure a lower interest rate apply for secured loans which are safer for banks. Check for credit insurance, prepayment penalties, and other hidden fees and charges. Unsecured loans are also offered by banks and credit unions, but the interest rate is higher. Some finance companies also advertise low interest rates, but the repayment period is very short, and the monthly payments are larger. Generally, your credit rating is the most important factor for banks.

If your credit score is tarnished, your application may be declined. Borrowers with an excellent and very good credit score (i.e. over 700) are offered competitive interest rates. Some lenders also offer bad credit auto loans, and borrowers with a history of delinquencies, late payments, and credit issues qualify. Visit your local bank if you are an existing customer.

Some financial institutions offer financing for brand new vehicles only. There are also refinance options with different interest rates and repayment schedules.

A down payment is usually required if you plan to finance an expensive item such as a vehicle or another asset. Borrowers who offer a larger down payment are offered attractive deals. The term varies, depending on whether you compare car loans. Customers who choose a short-term loan make larger payments and pay off the balance faster. If you are self-employed, you may have to present your individual income tax returns and other documents. It is important to have accurate financial statements. The main goal is to check whether you are a risky borrower.

You can apply at a local branch, by phone, or online and will get an initial credit decision shortly. The application process may take several weeks. There are different online tools that calculate the monthly payment and help customers to make a decision. Enter the start date, term, interest rate, and any extra payments. Some online tools also allow customers to calculate the amortization schedule, which makes budgeting easier. You may want to calculate the payment on simple interest and pre-computed loans.

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