An auto loan may be a bad debt, but it’s nonetheless a necessary, and therefore practically unavoidable, one. A vehicle (new or used) isn’t an investment as its value drops significantly after driving it off the lot. However, you can’t have it because it’s perhaps the most reliable mode of transportation to go to work or run errands.
The real problem, though, is that many South Carolinians buy cars for more money than necessary. Of course, you can’t borrow without paying for interest, but it’s imperative to take precautions to reduce your costs.
If you’re shopping around for auto loans in Lexington, SC, or any nearby communities, Palmetto Citizens Federal Credit Union says to avoid these common mistakes to keep your interest to a minimum:
Being Clueless About Personal Credit Score
Never talk to a lender or car salesperson without knowing your current credit score. If you let others to define creditworthiness, and presume your qualification based solely on what they say, you’ll lose the negotiation. You, of all people, should know your credentials as a borrower to know precisely the range of interest rates you qualify for.
Borrowing Directly from the Dealer
Securing financing from the place where you’d buy the vehicle seems convenience, but it’s unwise. Dealers usually broker loans with external lenders, which are banks, in general, receiving a commission in the process. The chances are that you’d be offered financial products beneficial to the dealership, not to you. To pay for less interest, obtain financing from a cooperative before you talk to dealers.
Paying a Small Down Payment
The more money you put down up front, the less money you need to borrow to buy the car. In turn, the less interest you’d likely to pay over the term of your auto loan.
Getting a Long Term
Pay off your loan in as few months as possible. The longer it takes for you to repay your lender, the greater the chances that other party wouldn’t get its money back. To compensate for the risk, you’d have to shoulder higher interest. Shortening the term of your auto loan means paying for more monthly, but it’d also lower your interest charges all in all.
The real cost of your auto loan is its interest. It’s reasonable to explore every possible way to minimize it to buy the vehicle you need and keep more dollars in your pocket.