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5 Things Auto Loans Won't Tell You

Tuesday, 28 Dec 2010 11:15 AM

Buying a car is always a huge decision, whether it is your first car or an additional one. It is generally preferable to take a loan to finance it, instead of using a large part of your savings.

However, there are several things you might miss out on while signing your auto loan contract, which will cost you both time and money. Unfortunately, most lenders will not tell you these things. Here are some of the auto loan secrets.
Choose a car that is best suited to your needs.  It is very important that you buy a car that serves your needs most effectively. Go for a car that gives a healthy mileage, is large enough for your family, and involves low maintenance costs. Avoid getting carried away by the smooth sales talk of the car salesman and buying a car that is over your budget; otherwise, you will end up paying more for something you don’t really need.
Maintain a good credit record. This is true of all major purchases you make, be it a plasma TV or a home. The better the repayment record of the borrower, the lower the interest rate offered by the lender. However, some lenders may deliberately keep you in the dark in order to get a higher rate of interest from you. Therefore, make sure that you maintain a good credit record before applying for an auto loan. If you find any errors, point them out to the credit bureau and have them corrected as soon as possible.
Negotiate with your lender. Most borrowers tend to think that auto loan rates are fixed and non-negotiable. However, this is rarely the case. You should always negotiate with the lender and ask for a better rate. It is always a good idea to compare rates and offers from several lenders and choose the best one. Often, banks that you have an existing relationship with will give you an attractive offer. So it makes sense to approach these banks first. You should also research on the internet and use auto loan calculators. There are several websites that have free auto loan calculators that help you determine how much the auto loan credit will cost you.
Consider a cosigner. Often, banks offer you a high rate of interest because your credit history is not strong enough. This is true if you are a student, or have defaulted on some payments in the past due to financial difficulties. In such cases, you can get the loan cosigned by another person with a sound credit record to get a cheaper auto loan. It could be a friend, or maybe a relative or parent, especially in case of student borrowers.
Read the auto loan contract carefully before signing it. It is important that you read all the terms and conditions mentioned in the loan contract before you sign it. Check for any hidden charges or fees that you may not have been informed about. Also look for clauses that could hurt you in the longer run. Generally, it is advisable to go for a shorter tenure even if the interest rate is higher. This is because you end up saving a lot of money in the long run.

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