There is hardly any person today who pays all the money upfront towards the car price. Most of them take to the car finance route to own or possess the car of their dreams. In simple terms, the car finance is a loan taken to buy the car for which you have to pay some monthly charge, called the interest rate. Some of the basic steps which you can follow to avail of this facility are the following:
1. Check for the options that you have for the financing: There are a number of different providers of this service but this does not mean that you can go to any of these and say that the deal is done. It is better to have a look at what the different providers are offering you. These providers could be the dealerships, credit unions or banks or even take the second mortgage route of financing. It is good to understand when to make use of their respective services.
The dealerships provide the most convenient way of car finance. They might charge a bit higher interest rate but you can get the loan when you cannot get the same from the other sources. Also, you can even avail of the same when the banks are closed. The credit union or the bank can also provide the car loan but they look into the history of the credit worthiness of the buyer and require quite a bit of documentation to do. The second mortgage route shall be tread with due care since if you fail to make the payment once, you risk losing the car as well as your home.
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Finance
How do i know whether i have good or bad credit?
There are three levels of credit scoring,Prime (Good credit score)
Near Prime (Average Credit score)
Sub-Prime (Poor credit score)
So what is Prime and Sub-Prime?
“Prime” is a term used in the finance industry for someone who has a good credit history and that makes all their financial commitments on time.
“Sub-Prime” is the opposite and so is someone who is considered to have an adverse/Poor or Bad credit history and either misses or has late payments.
How does being Prime or Sub-Prime affect me?
I often hear people say they are looking for finance but are worried they will be turned down or have been in the past, this is a good example of someone who is or might be “sub-prime”. Someone that is “Prime” would be able to obtain credit by most high street banks or lenders.
If you a “Sub-Prime” customer you should expect to pay a higher APR than “Prime” customers, this is because you are considered a higher risk based on your previous credit history.
Can i still get credit if i am Sub-Prime?
Yes!
If you think you have an adverse credit history always search for a company that can offer credit to people with a poor credit history. Remember the more credit searches you have done then lower your credit score will be!
New car buyers should educate themselves about auto financing long before they step into a dealer showroom. Learning about financing from a dealer salesperson on the day you intend to buy a car is not the best way.
The factors that determine how much you’ll pay for an auto loan are 1)amount to be financed, 2)loan term (months), and 3) interest rate (finance charges).
The amount to be financed will include the vehicle price that you and the dealer agree upon, plus any additional costs such as credit insurance, extended warranty, and dealer-installed optional equipment. This amount may also include fees and taxes involved in the purchase. This amount can be reduced by any down payment, rebates, or trade-in allowance.
Loan term is the number of payment months, and can range from 24 months to 72 months or more. Generally, the longer the loan, the lower the payments. However, there are disadvantages to long-term loans. Long loans with lower payments do not pay down the loan principal as quickly as a shorter loan. This often creates a “negative equity” situation in which the loan balance exceeds the current market value of the vehicle. This can become a problem if the owner wants to sell or trade for another vehicle in the middle of the loan. Furthermore, if the vehicle is stolen or totaled in an accident in mid-loan, insurance only pays current market value, not outstanding loan balance.