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Auto Loan Pitfalls And Solutions

Feb 1, 2008
Knowing a few facts about auto loans may reduce your costs when you buy your next new or used car. Auto loan or as it is called auto financing, has certain pitfalls which you should avoid. In usual cases, auto loans are taken out by leasing out the car that you are buying. This is the general way auto financing are provided to the buyer. Before you go to the car dealer, you should have a credit check done, and then you should answer some tough questions related to car financing. When you have done that, you are more prepared to deal with the dealer.

If you are not careful during the time you take out your auto loan, the deal might go wrong. This mostly happens with problems that happen during drawing up of the contract in the Finance and Insurance office. By the time the contract is drawn up, many car buyers would have lost their potential savings due to the terms that have been lodged into the contract. You should have a detailed knowledge of the car loan deal, and knowing only the front and center of the information can cost you your entire saving and more.

The first and foremost thing that you would need to do is to make sure that the deal that you had with the car dealer is put in writing into the contract. This deal will mostly determine the amount of installment that you would need to pay against the car loan that you intend to take out, and the required interest. You should be conversant with the kind of interest rate that is usually charged, so that you are satisfied with the one charged to you. At times the interest rates are made out on the higher side, so that the dealer can make an extra profit out of the deal.

Your credit score determines the kind of interest rate that will be charged to you. There are many car loan applicants who are not aware of their credit score and lands up paying large interest rate, or are connived into paying higher rates. In order to properly negotiate the interest charges, you need to at first, order a copy of your credit score and find out the hindrances in the items which may prevent you in getting a good rate of interest. If you should find any error in your credit report, these should be taken up with the credit bureaus, and corrected promptly before you go for car financing. Look for any identity thefts in the report, and find out if your lines of credit are in good standing.

Many of us walk into the car dealer's office without a proper approved auto financing document. There may be two reasons for this. It could be that the person is not aware of the various financing options available, or he takes for granted that he will qualify for a low interest rate at the dealer. With this approach you lose your bargaining power as regards to the interest rate being charged to you. To avoid this, before you approach the dealer, you must empower yourself with relevant information regarding available interest rates. The information is widely available in the internet, and you could easily spend some time to make proper noting.

The officers in the Finance and Insurance office may confuse you with the different elements of your car loan deal. They could offer you extra-low price on the car, but say that, as far as the interest rate is concerned it is the best that they could do. You must understand that, in negotiating a car loan in the process of buying a car, there are three different negotiations, which are the price of the vehicle itself, financing, and the trade-in value. You should always focus on the Annual Percentage Rate(APR) without being driven off the track in negotiating other aspects of the loan.
About the Author
J Amalorpava Mary is the owner of Best Loan Inc, to find out more information on Auto Loan and much more financial topic visit her site.
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