Getting the best auto loan means knowing what’s involved, and being prepared.

 There are several key components of an auto loan. The money you contribute upfront is the down payment, and usually varies from 10 to 20 percent of the purchase price. The time the loan will span is called the term, and a typical term is up to 5 years. The bank or other lending institution charges you interest over the life of the loan that must be paid back on top of the principal, or actual loan amount.

 With new or used car loans, you have complete ownership of the vehicle. You can modify or sell at your discretion, but you are also responsible for all maintenance. How much maintenance is covered by a warranty is something you should carefully examine before purchasing.

 Preparation

The most important thing you can do in preparation for obtaining a car loan is checking your credit history. With free services like Experian and TransUnion, you can obtain your credit score, which will be used extensively by dealers and lenders to determine which loans you can qualify for:

• If your credit score is above 680, you are a "prime borrower." You are likely to be approved for any loan, particularly low APR  (interest rate) loans

• If your credit score is below 680, you are "sub prime." You’ll probably qualify for a loan, but you will most likely incur a higher interest rate. 

• If your credit score is below 550, you are unlikely to qualify for a normal auto loan. You can look into options for low credit score loans.

To increase your chances for a fair and reasonable car loan, ensure your credit report is entirely accurate. Pay down credit card balances and pay off higher interest-rate cards. Ensure you have been in the same address for at least 6 months, and in a job for at least that time.

Another key preparation before buying a car and obtaining financing is research. Research cars and their pricing at sites like Cars.com, InvoiceDealers, CarsDirect, Edmunds and Auto web. These sites can often provide the complete details on car styles and handling, car pricing, dealer cost, and more. Use your findings as a basis for all dealings with salespeople.

Online Pricing

With the advent of online lending, borrowers have options like never before. To ensure the most fair and comprehensive loan for your situation, consider online loans at sites like CapitalOne AutoFinance or HSBC AutoFinance.  

According to the Consumer Federation of America, car buyers are often overcharged by 3% on their loans at the dealership, which can add $1000 to the life of their loan. Online lenders usually beat any deals the dealership can offer, and may not require application fees or down payments. With loans online, you may find some powerful benefits:

•  Lower rates

• No app fees for New Car Loans and Used Car Loans

• APR is locked for 60 days

• Less frustration and potential loss of money

• Quick response - quoted loan approvals are usually within an hour during business hours. In addition, your check can arrive via FedEx the next day.

• No new car finance hidden fees, points or prepayment penalties

Even if you opt to go with financing at the dealership, you have a powerful bargaining tool when you get quotes from online lenders. With an online offer you have a standard for dealers to beat: compare to dealer auto financing and see which is most appropriate for you.

Additional Considerations

Don’t limit your shopping for financing to just the purchase price. Look for extended warranty prices online at sites like WarrantyDirect to compare with the dealer’s warranty prices.

Finally, if you put down less than 20% on your new car loan, you should consider Gap Coverage. If you owe $20,000 on your car, but it is only worth $16,000, you are at a disadvantage. A total accident or a stolen car will result in an insurance payoff, but only for what the car is worth: $16,000. You’ll need to come up with $4000 to pay off the lender, as well as any deductibles charged by your insurance company. Gap coverage protects against this, and is available for far less than dealers offer at sites like GapInsuranceQuotes.com.

Many people dream of owning a new car. However, one of the biggest stumbling blocks is the cost of today's vehicles. Read this report to learn about automobile financing, especially before visiting a dealer's showroom.

1.Financing a New Car

Unless you're among the minority of people who pay cash, you need to quickly become an informed consumer on the subject of financing if you're considering buying a new car. For most new-car buyers, one of the biggest costs of purchasing a new car is interest on the loan that makes the purchase possible. But there are a variety of ways to finance a car, and knowing your options can help save you money.

 2.Preapproval Can Be a Plus

Just as you want to pay the best price for a car, you should also comparison shop for the best deal on a car loan. And the ideal time to shop for a car loan is before you shop for a car.

 Getting your loan preapproved before you start looking for a car is like shopping with cash. You can drive the car right off the lot -- no more waiting for the loan to be approved and disbursed and taking the check back to the dealer. In most cases the loan can be approved by your lender in a couple of days.

 3.Shop Around for Financing

 All lenders are not alike. You can save hundreds of dollars by shopping around to find the best financing deal. Before you sign anything, talk with several lending institutions so you'll know their current loan rates. Then see if a dealer can give you a better rate.

 And even if you get a low loan rate, perhaps a promotional rate, watch out when the financing salesperson starts selling. You probably don't need the extra life insurance, extra accident or health insurance, or extra protection for their rustproofing and undercoating.

4.Borrow From a Dealer

Convenience is the word here. With many car companies having their own lending affiliates like GMAC (General Motors Acceptance Corporation) you can choose a car and a loan in one application process. The process is usually quicker than applying for a bank loan, and dealers are more likely than banks to qualify buyers with less-than-perfect credit ratings. They also usually help customers with special needs, like first-time buyers and recent college graduates. Best of all, car companies sometimes offer low-rate promotional financing on certain models. (But don't expect discount financing on popular models.) The downside? Dealer financing can be more expensive, particularly for poorly informed buyers. (Dealers can sometimes make as much on the financing as on the sale itself!)

 Negotiate the car's price before you talk about the terms of a loan, so the dealer can't hike the car's price to give you a lower-rate loan. Even if you get low dealer financing rates of 2% to 5%, there's a catch: these loans are usually short term. Since many must be repaid in 24 months, monthly payments can be steep.

Common Usage

 5.Borrow From a Bank, Credit Union, or Finance Company

Banks and credit unions usually offer set, nonnegotiable rates, often less expensive than dealer financing. (They are also less likely to push the unnecessary expense of credit life insurance, which ensures that the loan will be paid off if you die prematurely.) Membership credit unions that offer auto loans typically offer lower rates than banks and finance companies. But finance companies â?” often the most expensive of all â?” may accept borrowers who are greater credit risks.

 In 1991, the IRS eliminated the income tax deduction for interest on most personal loans. The major exception is interest on a home equity loan, which is tax deductible on principal up to $100,000 no matter how you spend the money.

 Some banks now offer "tax-smart" loans to give back the car-loan deduction to consumers. A tax-smart loan combines the ease of a regular auto loan with the tax deductibility of a home equity loan. With a tax-smart loan, you do not have to go through the closing procedures and expense required by a regular home equity loan. And you can usually borrow up to 100% of the equity in your home. Unlike a regular home equity loan, the primary collateral on a tax-smart loan is the automobile. To earn the tax benefit, a lien is placed on the home as well.

 While tax-smart loans may be smart for the bank that offers them, they may not be such a great deal for the borrower. A tax-smart loan is safe for a bank to make: it has the security collateral of both your car and your house. The bank usually charges the same interest rate on a tax-smart loan as on a regular auto loan, which could be significantly more than the rate charged on a home equity loan.

 Not only are you tying up the equity in your car and home for this loan, the savings you realize on the tax deduction may be less than the money you save with a lower-rate loan.

 6.Borrow Against Investments

Another option is to borrow at an attractive interest rate, with a flexible repayment plan, against a securities portfolio, passbook savings account, or a cash value life insurance policy.

 7.The Quicker the Payback, the More You Save.

If you take out a loan for a car, get the shortest payback time you can comfortably handle. While monthly payments can be reduced by stretching them out over more time, only a lower interest rate, a smaller loan, or a shorter term will lower the total expense.

 A $15,000 loan at 8% for five years, for example, will cost $3,240 in interest. You would save $672 if you paid an extra $62 a month for the same size loan over four years. The total interest cost would drop to $2,568.

Common Misspelling

     Spanish Translation

Mortgage Financing