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How to Make the Most of Your Auto Loan

Getting an auto loan is a serious commitment and should thus be handled very carefully. Getting the best deal may involve comparison of different institutions, applying effort to improve your eligibility and seeking expert advice, but this is rarely enough to cushion you against unwise decisions leading to regret and disappointment later.

Auto loan calculators are the best way to determine the best deal for a borrower, as well as the most convenient payback arrangement; and are quite common on the internet. Some finance institutions may adjust their repayment schemes to suit an individual’s budget, but this is not dependable. Going for the shortest payback time will minimize the cumulative interest you have to pay, but the monthly installments could be prohibitive. In some cases, attractive deals may conceal promotions or hidden charges e.g. rust-proofing the car you buy. Pre-approval, i.e. getting the loan before buying the car is advisable, and more sensible than first acquiring your new wheels and then waiting for the loan to come through.

Some might argue that the best place to get your auto loan would be from an independent lender rather than from giant institutions like banks, mainly because the private lender is more likely to disregard a questionable credit rating. The private lender is also less likely to try palming off an extra deal over and above your loan, like insurance policies for instance, and with a privateer, there are no middlemen trying to earn commissions from sales volumes. On the other hand it might be wiser to approach a bank because they typically offer fixed interest rates, which are generally cheaper than independent lenders’ charges. Finance companies have the advantage of accepting greater credit risks but the trade-off is they are the costliest in terms of interest rates.

If you have approached a bank, find out from them if it is possible to borrow against an investment. This almost always lowers the interest rates as well as acting as security for the loan. Home equity loans attract the lowest interest rates, because the value of the house more than covers the size of the loan. In some places, interests on home equity loans are tax deductible. However, the repayments for the home equity loan are of paramount importance lest you find yourself living in your new car.

Also ask the finance company whether account holders at the bank qualify for low interest auto loans; you might be surprised that they do. After getting the loan, shop around for the most appropriate car along with the best car prices and the best financing deal.

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