Automobile Financing Know Your Options

Automobile Financing Know Your Options



Automobile Financing - Know Your Options
You’ve found the car that makes your heart race by 120 beats per minute .​
Now only one thing stands between you and the car of​ your dreams: financing the purchase .​
In a​ perfect world, you’d pay the full price in​ cash without blinking .​
But if​ you’re like the seven out of​ ten car and truck buyers who don’t live in​ a​ perfect world, chances are you’d be paying for your car through one of​ several financing schemes .​
Understanding the basics of​ each car financing option is​ key to​ choosing the automobile financing strategy that best suits your situation .​
Here is​ an​ overview of​ auto financing options that may be available to​ you .​
Auto Loans from Lending Institutions
You can get a​ car loan from a​ bank, credit union, or​ other lending institutions .​
The car that you purchase will serve as​ collateral for the auto loan .​
This means that the lender can repossess your vehicle if​ you default on the car loan .​
Auto loans are a​ popular car financing option because they generally offer reasonable interest rates and are relatively easy to​ get .​
Two factors are likely to​ affect the total cost of​ the car loan .​
One is​ the term or​ duration of​ the loan .​
Generally, the longer the term of​ the loan, the lower your monthly installment will be .​
But you’ll end up paying more towards interest and this will increase the total cost of​ the auto loan .​
If you can afford it, get a​ short-term loan .​
Your monthly installment will be higher, but you’ll be paying less money over all .​
The second factor that may affect the total cost of​ your car loan is​ your credit rating .​
Creditors with less-than-stellar credit history are usually charged a​ higher interest rate because of​ the elevated credit risk .​
Dealer Financing
Like traditional auto loans, dealer financing is​ reasonably easy to​ get .​
Most dealerships have relationships with numerous lending institutions, so they can arrange car loans even for car buyers with blemished credit histories .​
To compete with traditional bank loans, many dealerships offer zero percent or​ very low interest on dealer loans .​
However, such loans are available to​ car buyers with stellar credit ratings .​
Consumer experts advise car buyers to​ get pre-approved on an​ auto loan from a​ bank or​ credit union before approaching the dealership for possible financing .​
By getting loan pre-approval from another lending institution, a​ car buyer gets the upper hand when bargaining for a​ lower rate on a​ dealer loan .​
Home Equity Loans and Home Equity Lines of​ Credit
If you own a​ home and have accumulated substantial equity on your property, then you may consider getting a​ home equity loan or​ a​ home equity line of​ credit .​
Home equity loans are fixed or​ adjustable rate loans that you repay over a​ predetermined period .​
Home equity lines of​ credit are open-ended, adjustable-rate revolving loans with a​ maximum credit limit based on the equity of​ your home .​
Home equity loans tend to​ have lower interest rates than credit cards and other types of​ personal loans .​
Interest payments on home equity loans may also be tax-deductible up to​ a​ certain extent .​
Home equity loans and home equity lines of​ credit use your home as​ collateral, so make sure you are financially capable of​ paying the monthly installments if​ you don’t want run the risk of​ losing your home .​
Credit Cards
A credit card advance or​ credit card draft from your credit card company can help you drive your dream car home .​
Like home equity lines of​ credit, credit card advances or​ credit card drafts are revolving lines of​ credit with variable interest rates .​
To entice existing customers to​ avail themselves of​ credit card drafts, credit card companies waive cash-advance fees, guarantee low rates during the initial period of​ the loan, or​ offer high credit limits .​
However, because credit card drafts are unsecured, they generally have higher interest rates than home equity loans, traditional auto loans or​ dealer loans .​
Financing your auto purchase through credit cards could also leave you vulnerable to​ hefty penalty charges if​ you make a​ late payment or​ exceed your credit limit .​
You may copy this article and place it​ on your own website, as​ long as​ you do not change it​ and include this resource box including the live link to​ the Credit Repair Advice site.




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