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Many young people could not afford their first car if used car financing was not available. They don’t have the money to buy a car outright. Fortunately, it is not difficult to obtain such financing at very reasonable interest rates. All you need to do is do your research and follow these simple steps.
When you’re paging through the used car ads, you’re bound to come across what looks like absolutely fantastic car loan availability from car dealers. You’ll see zero percent offers, low paying offers that sound too good to be true. of course they are! These ads are meant to mislead you, force you to come in and apply, and end up getting loans at 10 to 18 percent off standard rates! Yes, interest free offers are available, but only if you have the right credit. Most used car buyers do not fall into this category. In general, used car loan interest rates are on average several percentage points higher than new car interest rates.
One way to reduce this cost is to get your loan through a car dealership or a dedicated finance company instead of your usual bank. These institutions generally have more liberal lending policies. However, any lender will require proof of the car’s value and a 20 per cent down payment. This is normal and should not be treated as a suspicious request. Both of these regulations are designed to give the lender a safety margin should the loan go into default. If this happens, the lender’s only recourse lies in the collateral, which is the car. So, naturally they have a vested interest in knowing that you didn’t pay too much for the car, and that at least 20 percent of its value is still up for grabs even if the default happens immediately. This is actually an advantage for you too. There is someone looking over your shoulder at the transaction, making sure it is a respectable deal and price in the vehicle’s current condition and condition.
Before you apply for your financing, do a credit check on yourself. This will help you determine what you should be able to afford and what needs to be offered. Sometimes, even before you get started, you may realize that a used car loan is not affordable for you. This may be due to a low credit score, inability to meet down payment requirements, or insurance concerns. It is important to know this, as online institutions will tempt you with one day offers. Don’t fall for it! Despite their dire warnings to end the offer, these lenders will be back with another great offer for you tomorrow! Wait till you are comfortable with the amount and terms. It’s not worth the havoc a loan default can wreak on your credit history when you’re unsure you can repay it as required.
Another caution with car loans and any other financial transaction – keep all your paperwork in the right order. If you have availed the loan online, print a copy of everything and submit it in a safe place. Never sign anything you don’t fully understand. Ask questions until you understand. Talk to a third party professional to get a different perspective. It is your responsibility to protect your interests. Don’t expect the lender to do it for you. This type of thinking led to the current mortgage crisis in the United States.
One final piece of advice: As soon as you get your used car loan, consider refinancing it, especially if you weren’t able to get the zero to three percent interest rate. Refinancing sites usually have calculators so you can calculate your total savings. If you can get percentage points under your current contract, it’s worth it.
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