4 Questions to Ask Before Signing an Auto Loan Contract

It seems as though it's easier than ever these days to get approved for auto loans Denver area and beyond. In fact, even those with poor credit seem to have no problems getting approved for a loan. This is certainly a good thing for those in need of financing, but it's still as important as ever for buyers to be aware of the terms of an auto loan before they sign any paperwork. Specifically, there are a few questions worth asking before signing on that dotted line.

How Long is the Loan Term?

Borrowers should begin by making sure they're aware of the length of the loan term; this is the amount of time they will have the pay off the loan entirely. For car loans, repayment terms generally range between 36 and 72 months. Just remember that the longer the loan term, the smaller one's monthly payments will be but the more interest will be paid over the life of the loan.

What's the Interest Rate?

Speaking of interest, it's also a good idea to be aware of one's interest rate on the loan. This is usually based on one's credit score, among other financial factors. Some car dealerships and auto lenders these days offer promotional financing with interest rates as low as 0%, though this is rare. Typically, borrowers should expect to pay between 2% and 5% in interest on their car loan. Either way, finding out the number and calculating the total interest paid is a must.

What Are the Penalties and Late Fees?

Even for those who don't anticipate being late on a payment or missing a payment altogether, it's best to at least be aware of the potential penalties associated with doing so. Furthermore, be sure to find out whether the lender offers any kind of "pass-a-payment" option or forgiveness for being late on one payment. Most lenders these days do.

Are These the Best Loan Terms?

Finally, before signing off on any car loan, it's important to step back and ask oneself if these are truly fair loan terms. Is it possible to get approved for a lower interest rate with another lender? If so, then it might be worth shopping around with different lenders to be sure before signing any kind of auto loan agreement with a lender.

Recognizing a Bad Auto Loan

People purchase cars on a daily basis. Most people do their homework when it comes to choosing the best car, but very few people research auto loans Denver. With more information about the loan process, most people can avoid committing to a bad car loan.

Why Bad Loans Threaten Livelihood

Nowadays, nothing is guaranteed. There are people who have worked for their company for years, who in turn, get laid off. No one wants this to happen after purchasing a new car, but it does. When a person agrees to pay for a car loan, they are agreeing to pay it for years; therefore, they have to anticipate potential risks in order to be able to maintain their same lifestyle.

Factors that Make a Loan a Bad Idea

After taking the time to choose a car, color, and multiple car options, it is easy to become heavily invested in the decision to follow through with the loan. However, before doing so, people should ensure that the loan is the best option for their family. The following are a few factors that make some car loans a bad idea.

High-Interest Rate

Individuals who have a history of paying their monthly accounts after the due date, often have to pay more for their car loans. Lenders who finance cars view these individuals as a risk since the likelihood that they will default on their loan is greater for them than other people.

People shouldn’t pay too much in interest to get the car they want. Instead of paying a high-interest rate, people should take the time to correct their credit reports so that they qualify for a better car loan.

Loans with Long Terms

Although a long term doesn’t guarantee that a car loan is bad, it’s not in anyone’s best interest to agree to a loan that has a long term. Longer terms mean that it will take longer to pay the car off, which means people will pay more for their car.

People should try to get a term that is short, yet helps them cover the cost of their monthly payment. Many people can reduce the term of their loan by financing less.

Examine Fees

Another way a lender can make a car loan a bad idea is by charging excessive fees. Many lenders have started charging when their customers pay off their loans early. A penalty for an early payoff isn’t advantageous for a buyer. Instead of agreeing to a penalty, buyers should look for other lenders that have better terms.

In-House Car Loans Make Car Buying Less Stressful for Car Shoppers With Financial Limitations

Many drivers find themselves in financial straits at some time or another, but they can take heart that many car dealerships want to help them find the right car and obtain auto loans Denver. People who are trying to heal their financial and credit records need to work. To achieve that reasonable goal, workers need a reliable car to make it safely to and from work. 

While public transportation is fairly reliable, it is often not enough to help struggling families maintain active lives in addition to their work, so it makes sense that they do what they can to find a car seller that understands their position and will do what they can to help them buy a new car.

In-House Loans and Financing Often Means the Difference in Buying a Car for Auto Shoppers

Often, people who need a vehicle to help improve their lives do not even leave their homes to go to car dealerships, dreading the inevitable time when they have to talk about their finances. Feeling embarrassed, frustrated and mildly hopeless, these potential car buyers do not give themselves and area car sellers a chance to make a difference. 

Thankfully, once people who truly need a car to make repairing their finances easier get out the door and out to a local car dealership, they will find more loan options available to them than could have possibly imagined. A little courage will yield great benefits.

Car sellers who provide financing options hire loan specialists to sit down with prospective car buyers to work out a deal that they can both live with. These financial officers listen to the car buyer's worries so they can offer a deal that makes them feel comfortable. It is important that the shopper feels confident that they can easily make the payments upon which they and the car dealership eventually work out.

People who feel extremely worried and nervous about talking to someone about establishing credit or repairing damaged credit can browse the dealership's website and call one of the financial representatives before they visit. A little advanced discussion might give potential car buyers the boost of confidence they need to visit their local car seller. Once they arrive, they can meet with a sales associate who already knows the price range that the customer can afford, per their own financial department.

Buying a Car: Loan Vs. No Loan

Everyone has their own preferences when it comes to buying a car. Here’s a quick look at a few tips for taking out a loan or avoiding one.

Tips for Taking Out a Loan

If a person wants to take out a loan, it is imperative that he or she be honest on the application process. While bad credit auto loans Denver are most definitely available, if a person is found to be lying on his or her application, this can result in the dealership refusing to give the loan.

Furthermore, it is pertinent that a person be reasonable about the type of car loan that can be afforded. Ideally, a car payment should not exceed 20 percent of a person’s monthly income. For example, if a person brings in $4,000 a month, the maximum car payment should be $800. And just to be safe, this $800 should also include maintenance costs and insurance expenses.

Tips for Avoiding a Loan

The first thing a person will need to do is let go of that feeling that they need to drive a new vehicle. A vehicle is just a tool to help get a person from one place to another. When paying cash, the whole point is to avoid debt, so the vehicle purchase must be centered on what can be afforded.

The next thing a person needs to realize is that there are tons of safe, reliable, and really fun used cars that are available for way less money than most think. Even if the buyer has a love for vehicles, there is always something out there that will catch their eye at an affordable price.

If the buyer does not have enough cash to make the purchase right away, they need to be patient. It is possible to save up lots of money fast by sacrificing small things like eating out. The buyer could even take a small part time job on the side for a little while to help complement the income from their full time job.

The Takeaway

No matter the way a person finances a vehicle, it is wise to make and stick to a budget plan. In order for some buyers to be able to pay cash for a vehicle then they might have to lower their expectations when it comes to the type of vehicle they buy. Still yet, though, there are plenty of affordable vehicles for sale, especially when looking through both dealerships and private sellers.

Why Should Auto Buyers Think About Car Financing First?

Normally, financing is one of the last things that people think about when they are in the market for a new car. However, it is always better to check out rates and availability of auto loans Denver first. After that, it is time to go shopping for a car. This makes it a lot easier to shop for the right new or used car. Buyers should have some idea of their budget to help them shop for vehicles that fit into their price range. Also, buyers who have already been approved for financing are likely to have some leverage to negotiate a better deal.

Loan Approval Letters

Most auto lenders will give prospective borrowers an approval letter. This gives borrows the assurance that they probably can get approved for auto financing. If they are approved, they should know how much money the bank will lend. The thing to remember is that sometimes these approval letters don't really commit the lender to anything.

For example, the lender may just do a quick credit check. However, other factors, like other outstanding debt, might still get the hopeful car borrower declined. Also, some lenders are picky about what types of cars they care to loan money for.

This is especially true for used cars. A loan approval letter provides some assurance, but it isn't an ironclad guarantee that a lender will make a final approval to fund the purchase of a new car.

Monthly Payments

Some auto buyers are lucky enough to be able to afford to pay cash for a car. However, most buyers have to borrow money. In this case, potential purchasers are likely to be more worried about the size of the monthly payments than the overall price of the car.

Down Payments for Cars

It is certainly possible to purchase cars without offering a down payment. However, buyers will find that offering to put down $500, $1,000, or $1,500 for a down payment will open up better terms both at the dealership and with most auto lenders. This shows that the buyer is financially stable enough to contribute the initial purchase, and it also allows the buyer to drive a car out of the lot that is not already underwater on a loan. Most experts say that new cars lose up to 20 percent of their value as soon as they leave the lot because they are no longer considered new cars.

Where to Get Auto Loans

Getting auto loans in Denver doesn't have to be a hard process. In fact, it is possible for almost anyone to get one, though different loan providers serve different markets. Here are some of the top sources and their typical customer bases:

Top-Tier Lenders

These are usually banks, and they offer the best interest rates. The main catch is that they only like to lend with those who have very good or great credit. Many people do not qualify for bank car loans, though it is still easier to get an auto loans Denver than it is to get an unsecured personal loan. This is because the car serves as collateral.

Auto Manufacturers

All of the big automakers have credit arms to handle the financing of cars sold at their dealerships. They will typically work with people who have credit on the upper end of the "fair" category, and of course, they'll be glad to lend to people who have even better credit. Rates from these lenders aren't usually as good as those from banks, but if there's a 0 percent deal going on, they are undeniably the best! One of the main catches with these loans is that they're only available to those who buy from the associated dealerships. People who want to buy a cheaper used car or one from a private seller are out of luck.

Bad Credit Banks

These are usually the ones behind internet ads offering auto loans Denver. They'll lend to almost anybody who hasn't declared bankruptcy on them in the recent past. This, however, doesn't make them a panacea for credit rebuilders. They charge high interest rates and are quick to send out the tow truck if a payment is missed. Since they're not usually based anywhere near the borrower, it's also impossible to pop into the office to pay at the last minute.

 

"We Lend to Anybody" Dealerships

Unlike automaker-affiliated dealers, these are typically independent operators with their own selection of late-model cars. Like other bad credit lenders, they tend to have high interest rates. Despite this, they're the go-to source for low-income people who need a car in a hurry. Since they're local, they are also very accessible when it comes time to pay.

Because these dealerships aren't affiliated with an automaker, they all have vastly different standards and offerings. Those who are careful in choosing one can get car warranties, better loan terms, and a car worth having.