Before Signing On the Line for an Auto Loan Be Sure You Understand the Offer
Although 90% of all auto loan offers are simple interest loans, there are some lenders who are pushing loans that are not. A simple interest loan means that interest is paid, or computed, only on the original principal of the loan. You should never agree to an auto loan that is not a simple interest loan.
The other thing that you want to insist on when securing an auto loan is that the loan be given with no pre-payment penalties. Simply put, this means that the lender will not penalize you, by charging a fee, if you pay the loan off early either through refinancing or other means.
It is important to remember that it is always easiest, and refinancing will save you the most money, when a simple interest auto loan with no prepayment penalties is refinanced with another simple interest auto loan at a lower interest rate.
Never Agree To a Pre-Computed Auto Loan
Some lenders offer auto loans that are not simple interest loans at all; they are what are known as pre-computed loans. Sub prime lenders will often target high risk borrowers with pre-computed auto loans, and some used car dealers might push this type of auto loan financing.
If you sign on the line for this type of auto loan, you are legally committed to paying back the full principal balance of the loan as well as the total amount of all interest that would accrue over the life of the loan.
If you agree to a pre-computed auto loan and then wish to pay it off early, either through refinancing the loan or another means, the lender will usually use an outdated and expensive formula, known as the rule of 78s to calculate a rebate of finance charges. Through this rebate you will pay a very hefty fee for paying the loan off early.
This type of loan allows the lender to apply more of the payment to interest and less to the principal balance of the loan. A pre-computed auto loan allows the lender to collect the majority of the interest due during the first half of the loan repayment period.
Hold Out For the Best Offer
If the first lender that you speak to is not offering a simple interest auto loan with no pre-payment penalties at a reasonable and competitive interest rate, walk away with a smile. There are plenty of other lenders eager to compete for your auto loan financing.
Record low interest rates, and the global lenders marketplace created by the Internet have led to a competitive lending market. In other words, it’s a buyer’s market! Check with your local bank, the financing that the automobile dealer is offering, as well as online resources. Remember to not only compare interest rates, but look for hidden fees and transfer balances that my not be apparent at first glance. By thoroughly investigating all of your options, you can’t help but get a loan that is perfect for you!
Didn't Find Enough
Information On Before Signing For That Car Loan Make Sure You Understand The Offer - Search Google Today!