These items in car loan terms are the main reason why you should read before you sign.
There are over 225 million people who have valid driver’s licenses in the US. If you’re one of these people, you may be thinking about buying your own car in the near future.
But like many Americans, you probably need some financial help to achieve this dream. For this, you’ll need an auto loan.
Here are 5 things you don’t want to see in your car loan terms.
1. A High-Interest Rate
If you don’t have a very good credit score, you may think you need to take the opportunity if you get approved for a loan. But this may cause you to struggle for years to come.
Before you sign a car loan, learn what your credit score is and how good it actually is. Car dealers are out to profit off you, so they’ll always offer you a higher interest rate if possible. Make sure you shop around to get the best rate possible.
2. A Long Repayment Period
It may cost you more for each payment, but you’ll pay less interest on your loan if you get as short a repayment period as possible. When you spread out your payments over a longer period of time, not only will you pay more interest, but you may also have to pay for higher interest rates.
3. No Down Payment
It may look nice to purchase a car without putting any money down, but this can hurt you in the long run. The more money you can pay upfront, the less interest you’ll have to pay on the car.
A good number to aim for is around 20%. If you can’t get that cash together but have a steady job, consider getting instant loans like a payday loan to get funds together quickly. Make sure to pay them off with your next paycheck, as interest rates can be quite high.
4. Extras You Can Get Elsewhere
Dealers will try and throw in extra costs, such as an extended warranty or credit life insurance. But the truth is, you can get these things at lower costs from another party. Don’t feel pressured to purchase these extras from the dealership.
5. Rolling Over Negative Equity
If you’re trading in your old car for your new one, you’ll have “negative equity” if you owe more than what your old car’s worth. If you decide to roll over negative equity to your auto loan, you won’t get the best one possible. This is because the loan is for the new car, plus your old car that isn’t worth much.
Understand Your Car Loan Terms Before You Sign
A loan is a serious issue, as you’ll be saddled with it for years to come. Make sure you understand all of your car loan terms before you sign on it. Otherwise, you’re in for years of turmoil if you fail to identify red flags in the papers before agreeing to the terms.
If you need help with the car buying process, then get some assistance by reading our articles.