Car Loan Interest Rates
Car loan interest rates can vary for several reasons other than just what the base interest rate is on the day you take the loan. There are different types of car loan, and if you take a standard loan from a bank you will not always find it the cheapest way to borrow money to buy a car. In fact you are more than likely to find it the most expensive way, other than using loan sharks or very expensive short-term loans.
When you are buying a car you have several factors to take into consideration, including the make and model, the engine capacity and what the auxiliary costs of running it are. And that’s without even considering the price of the car and how you are going to finance it, let alone the car loan interest rate. These auxiliary costs include the road license and your insurance, assuming you want more than the minimum that comes with the Reggo.
However, the most important is the finance for your car, unless you have the readies to pay cash. Most people don’t, so they will be looking for a car loan and comparing interest rates. One tip is to get the loan organized before buying the car. This might sound a bit insane, but many dealers will sell you the car, telling you that the finance isn’t a problem. They can sort that for you! Only thing is, once they sort it, it’s the interest rate that’s insane, and you would have been saner getting your car loan agreed before you went anywhere near the dealer.
Don’t believe the teaser 0% finance deals. Nobody is going to lend you money at 0% interest. It’s the same with ‘pay nothing till September next year’ deals or ‘pay nothing for nine months’. You often find that after your nine months you have a massive lump sum to pay to cover the interest you haven’t been paying, and if you don’t pay that you are taken to court - or you could even lose the car.
There is no such thing as 0% interest - it’s only when you are going to pay it that has been postponed, and then it’s usually in the form of a lump payment. Make sure you read the small print on dealership loans, or any other car loan that offers you a deal that seems too good to be true. It usually will be!
Try to find a package that that suits you, and check it for any hidden fees or ‘break fees’ for settling up earlier. A good deal should allow you to make extra payments when you can afford it, so that you can pay off the car loan quicker. Just like any other type of loan, your car loan can be secured or unsecured. A secured loan is one that provides security to the lender in case you fail to pay; security can be your home or something else that the lender can use to raise the amount of the loan in the event of you not paying. An unsecured loan generally draws more interest than its secured equivalent, and also possibly high arrangement charges.
The loan company could insist on you having fully comprehensive insurance on your car, and also life insurance so that the loan is guaranteed to be paid if you die during the loan period. You might also have to take out employment insurance in case you lose your job. These are all things that you have to take into consideration in calculating the total cost of your loan.
There are, however, finance companies that do their best to ensure that you have as easy a ride as possible through the car loan minefield, and provide you with all the help you need to get a deal that suits you and enables you to tailor your car loan to your own personal needs. They can carry out encumbrance checks, for example, that make sure that there no outstanding loans against the car you are purchasing that could cause problems for you. They will also make sure that the person selling the car is the real owner - you would be surprised at how many cars are sold by people that don’t actually own them. Or perhaps you wouldn’t be!
Perhaps you would like your first payment to be delayed, or make car loan interest only payments to start with until you are earning more money. You can get these from dealerships, but when the extended period is over so is the honeymoon: you suddenly find yourself with a massive bill that includes all your back payments. A good car loan deal will not do this, and your interest rates will not suddenly increase once the deal period has finished. You could also arrange a balloon payment, where you pay less at the beginning of the loan, and then a final payment once you have earned enough and saved enough to pay it. Many people finance the balloon payment through an insurance policy that matures when the final loan balloon payment is due.
If you can arrange a car loan interest rate that is fixed for the entire period of the loan, you will know exactly what you are paying irrespective of any interest changes due to factors outwith your control.
Car loan interest rates can seriously affect not only your ability to pay, but also your future if they change during the period of your loan. Make sure that you find a good reputable loan company that is sympathetic to your needs, and you are certain will not change the rules when the economic climate changes.
It is not just the car loan interest rates that can cause you to have to pay much more for your loan than you originally arranged, but also a poor choice of lender. There are good and bad lenders, so make sure that you choose one that is sympathetic and that you and they are able to be flexible according to changing financial conditions.
