At this stage you are probably wondering about the loan and how it works. An auto loan is basically a loan that you take out in order to purchase a vehicle. With an auto loan, you are not paying on the depreciation of the vehicle like you do with a lease. You are paying on the vehicle purchase price plus interest. But auto loans can come with their own issues. In March 2012, the Federal Trade Commission brought up two cases to stop car loan modification scams. One case was about how a car loan company charged a certain amount and promised to reduce their monthly car loan payments over time.
Actually loans don’t work that way. If you need to reduce your monthly payment then the loan term gets extended and you end up paying more as interest money. A loan document, once signed is binding and careful reading of the same will ensure that you have a thorough understanding of what you are agreeing to.
Another popular tactic used by less reputable lenders is where the dealer promises a loan with great terms, collects a down payment and lets you take the car. A few weeks later you get a call saying the loan did not come through and you need to reapply. Of course, this time, the terms are not so attractive but by this time you are already using the vehicle and you are now in the middle of a jam-and not a traffic jam.
“If the financing doesn’t go through, the dealer may require you to secure other financing at a higher interest rate or ask you to return the car,” says Christopher Kukla, a senior counsel for government affairs with the CRL in Durham, N.C. “The dealer can charge you for wear and tear on the car or even a daily rental fee for the period you’ve had the car if you choose not to refinance.”
This kind of financing, called Yo-yo financing, is illegal in all States in the US.
Other loans to avoid are those that are not so direct. They could be indirect pressures exerted by the salesman to invest in extended warranty, insurance, service contracts etc. which can all add up to a sizeable extra amount. The dealer can make this offer tempting by saying that your loan will take care of all this. However, you could be actually paying more for all these add-on services.
To summarize, car loans are easily available and offer a great option for people who love cars and want to own them without spending all their savings on the same. By going through direct auto finance partners like BlueSky Auto Finance group, you could get approved before you go to a dealership – even if you have bad credit. Being smart and aware will ensure that you come out with a great car and a better auto financing in a hassle-free environment.