Car Loans 101: Important Things to Remember About Car Loans

There is nothing more gratifying than having your own car. Today, both men and women are looking forward to get their own. Thanks to car loans and auto finance, there is now a better chance to drive your dream car.

There is always a debate on purchasing a brand new car. To begin with, cars are expensive. Whether it’s brand new or second hand, it involves a lot of money. Some people even think cars are plain luxury; there are more important bills to pay.

Car loans are designed for people who need help in purchasing cars. It is true that you can get a large amount discount if you pay in cash, but if you don’t have the luxury to pay in cash-- car loans and auto finance are your best options.

Things to remember:

- Good deal. Before you decide on getting a car loan, negotiate with your financier. Some payments can be arranged. Go for the deal that could benefit you.

- Contract features. Check the add-ons they offer. Some loans include car insurance on the loan contract.

- Repayment conditions. Payment terms depend on the agreement between the client and the lender. Generally, it is on a monthly basis.

- Adjustment period. Be aware that you will be saving up for your car. Prepare yourself for additional monthly bills.

- Good credit. Avoid payment delinquencies to avoid penalties. Pay early if you can. Improve credit standing by paying debts on time.

- Budget. Compute your monthly income and expenses, and stick with your budget. Do not get something you cannot afford.

Purchasing a car may be a form of luxury. It depends on how you look at it. If providing comfort for your family is the reason you are getting a car, then it becomes a necessity. Cars are not just toys for status symbol.

How Much Car Finance Interest Will You Be Charged?

Individuals with good credit standing and above average credit scores get better car finance interest rates. Unfortunately, the global economy today has taken an impact on a lot of people’s lives, and getting a score of at least 660 has become harder for most people.

The following are the US national average auto finance interest rates based on a 60 month car loan (according to FICO score):

FICO Score	Interest Rate
720 - 850	5.78%
690 - 719	7.42%
660 - 689	9.45%
620 - 659	12.79%
590 - 619	17.70%
500 - 589	18.52%

Individuals who are planning on getting a car loan should consider the interest rates given to them by car loan companies. The duration of the loan does not directly affect the interest amount that a car buyer is charged. The interest rate for car buyers depends largely on what their credit score is. The higher the credit score, the lower the interest rate. Unfortunately, a lot of people fall under the 620 to 659 category. An interest rate of 12.79 percent is too much for a lot of people.

Buyers who have lower FICO scores but have the capacity to get short term loans are better off than getting a 60 month loan. Credit scores can greatly improve over time, and being stuck with an 18.52 percent interest rate when you’ve already improved your FICO just isn’t fair.

If your current credit score falls below 590, consider holding off purchasing a car until you get a score of at least 620. The 4.91 percent interest rate difference between a score of 590 and 620 is already a valuable amount you can save for something else.

Also, get a quotation from more than one car finance company and compare the rates they give. It is better to have many options than to settle with what you think is already a great deal. Some companies give great deals such as additional savings, discounts, and rebates.