Great Ideas for Saving on Car Loans
By admin at 8 June, 2009, 12:37 am
Do you want to save money on your next car loan? Sure, you do. Now, here are some of the options and tips that you can do before you go shopping for cars:
Home Equity
To lower your car’s interest rates, you can take advantage of your abode through home equity. There are two choices here. The first one is the home equity line of credit or HELOC and then the home equity loan. Both of which will surely lend a helping hand into your goal of minimizing the interest payments for your car when compared to the standard car loans. They work efficiently since they are held against your home’s value. For the home equity credit, the interest is oftentimes tax deductible if you document it on your federal tax return.
Now let us compare those two choices. If you want the lowest initial rate, a HELOC will work for you. However, bear in mind that the rates here are variable, which means that there are possibilities that the payments will increase without prior notice. Usually, this is only good for car loans that are not more than 36 months. Otherwise, it is best that you go for a home equity loan since this has a fixed rate for the entire term. Whatever you will select here, you should understand that it is required that you have to be disciplined enough to make the payments on time or else, you may end up selling your home.
Independent Financing
Now, before you go shopping for cars, go to an independent lender where you can obtain financing. This can help you get more savings because dealer financing is much more expensive in contrast to car loans through banks. Think about it: there are several times that a car dealer makes even more money with the financing than the actual sale of the car. Dealers typically ask you how much you can afford for the car’s monthly payment. Now this gives them the opportunity to hike up the interest for that certain monthly payment point. Later, they will only sell the loan to an institution so that they will receive a commission derived from the difference of the interest rates and the regular amount that the bank charges. This will only mean more expenses for you. For instance, your car loan of 48 months is 20,000 dollars, the difference between the normal 7% interest from the bank and the dealer’s interest of 9% is more than 900 dollars over the loan term.
Watch out for Zero Interest Loans
Although they can be deceiving at times, be careful in dealing with zero interest loans because they may not be the best choice for you especially when you will lose a large rebate along the process. Take for example this instance where you will buy a 16,000 dollar car and you can pay that amount for 36 months without interest or you will receive a 2,000 dollar rebate. Now, every month you have to pay about 444 dollars but if you compare this with financing through the bank at 5%, it will only cost you around 419 dollars. That saves you more than 24 dollars every moth of for more than three years, that’s 894.60 dollars.
Credit Score Check
This should be done before you go shopping for any type of loan. Doing so will help you correct the inaccuracies in your credit score and report so as not to affect your credit rating. It will also be useful if you remove all the risk factors like overdue credit card bills. Most lenders base the interest rates on your credit score so improve your credit for lower loan rates.
Leasing
This method became a trend in the 1990s which allows people to purchase a new car through paying monthly. This is typically lower than loan monthly payments. Actually, you can lease a new car for only 200 dollars or even less. However, there is no resale value after the expiration of the lease. There are lease specials that are being advertised for you to have the best deal. Cash in on them but ensure that you have read the terms and conditions such as whether these include fees and taxes. Consider paying a large initial down payment so that the lease rate will be lowered securely.
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