Many young people could not afford their first car if used car financing did not exist. You just don’t have the money to buy the car right away. Luckily, it is not difficult to get such financing at very competitive interest rates. All you have to do is do your research and follow these simple steps.
As you browse through the used car listings, you are bound to come across what looks like an absolutely fantastic auto loan availability from the auto dealers themselves. You will see zero percent offers, low payment offers that seem too good to be true. Of course they are! These ads are designed to mislead you into applying and ending up getting a loan at 10 to 18 percent over standard rates! Yes, there are interest-free offers, but only if you have a good credit rating. Most used car buyers don’t fall into this category. In general, the interest rates for used car loans exceed those for new cars by several percentage points on average.
One way to mitigate these costs is to get your loan through a dedicated finance company rather than the dealership or your regular bank. These institutions generally have more liberal lending policies. However, each lender requires proof of the value of the car and a 20 percent down payment. This is normal and should not be considered a suspicious request. Both regulations are intended to give the lender a safety margin in the event that the loan defaults. In this case, the lender’s only recourse is the security, i.e. the car. So of course they have a vested interest in knowing that you didn’t overpay for the car and that at least 20 percent of its value will be preserved even if the default occurs immediately. This is even an advantage for you. Someone will look over your shoulder at the transaction, making sure it is a respectable deal and priced for the vehicle in its current condition and condition.
Before you apply for your financing, carry out a credit check on your person. This will help you determine what you should be able to afford and what should be offered. Sometimes, before you really get started, you may find that a used car loan isn’t affordable for you. This can be due to low credit, inability to meet down payment requirements, or insurance concerns. It is important to know this because online institutions will entice you with daily deals. Don’t fall for it! Despite their dire warnings about the offer expiring, these lenders will be here for you tomorrow with another fantastic offer! Wait until you are happy with the amount and terms. It’s not worth the devastation a loan default can have on your credit history to take now if you are unsure of your ability to repay it as required.
Another precaution with car loans and other financial transactions – keep all your paperwork in order. If you got the loan online, print it all out and keep it in a safe place. Never sign anything you do not fully understand. Ask questions until you understand. Talk to a third party for a different perspective. It is your responsibility to protect your own interests. Don’t expect the lender to do this for you. This mindset has led to the current mortgage crisis in the United States.
One final piece of advice: once you get your used car loan, you should look into refinancing, especially if you weren’t able to get zero to three percent interest. Refinance sites usually have calculators that you can use to calculate your total savings. If you can get a percentage point under your current contract, it’s worth it.