Many young people would not be able to afford their first car if it weren’t for the availability of used car financing. They just don’t have the cash to buy the car outright. Fortunately, it is not difficult to obtain such financing at very reasonable interest rates. You just need to do your research and follow these simple steps.

As you flick through the used car ads, you are sure to come across what seems like an absolutely fantastic availability of car loans from the car dealers themselves. You will see zero percent offers, low paying offers that seem too good to be true. Of course they are! These ads are meant to trick you into logging in and applying for a 10-18 percent loan over standard rates! Yes, interest-free offers are available, but only if you have perfect credit. Most used car buyers do not fall into this category. Typically used because interest rates on loans exceed new car rates by several percentage points on average.

One way to mitigate this cost is to get your loan through a dedicated finance company rather than through the car dealer or your regular bank. These institutions generally have more liberal credit policies. However, any lender will require proof of the car’s value and a 20 percent down payment. This is normal and should not be considered a suspicious request. Both regulations are designed to give the lender a margin of safety, should the loan default. If that happens, the lender’s only recourse is the collateral, which is the car. Therefore, they naturally have a vested interest in knowing that you did not pay too much for the car and that at least 20 percent of its value remains even if the default occurs immediately. This is also an advantage for you. There is someone looking over their shoulder at the transaction, making sure it is a respectable deal and price for the vehicle in its current condition and condition.

Before applying for your financing, check your credit. This will help you determine what you should be able to afford and what you should be offered. Sometimes before you start, you may find that a used car loan is not affordable for you. This could be due to a low credit score, an inability to meet down payment requirements, or insurance concerns. Knowing this is important, because online institutions will tempt you with one-day deals. Don’t be fooled! Despite your dire warnings about the offer expiration, these lenders will be there tomorrow with another fantastic offer for you! Please wait until you are comfortable with the amount and terms. It’s not worth the devastation that defaulting on a loan can affect your credit history so take it now when you’re not sure you can repay it as needed.

Another precaution with auto loans and any other financial transaction: keep all your paperwork in order. If you have obtained the loan online, print a copy of everything and keep it in a safe place. Never sign anything that you don’t fully understand. Ask questions until you understand. Talk to an outside professional to get a different point of view. It is your responsibility to protect your own interests. Don’t expect the lender to do it for you. This is the kind of thinking that led to the current mortgage crisis in the United States.

One last tip: As soon as you get your used car loan, look into refinancing it, especially if you couldn’t get an interest rate of zero to three percent. Refinancing sites often have calculators so you can calculate your total savings. If you can get a percentage point with your current contract, it’s worth it.

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