Cheap Car Loans: The Pitfalls
Hidden Costs of Cheap Auto Car Loans
When is a cheap car loan not a cheap car loan? When it comes laden with more extras than the DVD of The World is Not Enough. All too often, what looks like a great car loan isn’t really such a great deal when you look at the figures closely.
The first thing you need to do is to carry out comparisons of different loans. It’s amazing how many people simply opt for the car dealer’s own financing deal, without bothering to compare other sources of finance. If you don’t compare, you lose out. However, it’s at this stage that you run into the first trick used by unscrupulous lenders: comparing with apples with oranges. For example, a lender might be able to give you conclusive proof that their monthly repayments are substantially lower than those being offered by rival lenders. However, you need to look at the complete picture.
What’s the payment period? For example, Lender A might offer you $300 per month over a period of 48 months, while Lender B offers you $400 per month over 24 months. Lender A seems to be saving you a hundred dollars each month, which seems like a pretty good deal until you do the math and work out that you’d be paying $4800 more in total if you go with Lender A. So do your calculations when you’re shopping around for quotes.
When you’re carrying out your comparisons, watch out for hidden costs. These can really bump up the cost of what looks like a great deal. Watch out for administration fees, credit check fees and other added charges. Ask to have all fees and charges put in writing before you sign for a loan.
The second important step in getting a cheap car loan is to protect yourself against credit rating scams. Most of us know that a bad credit rating means that you won’t get such a good rate on your car loan. But how many of us actually know what our credit rating is? Unscrupulous loan providers can use our ignorance to their advantage, by telling you that you have a low credit score and you have to pay extortionate rates. You don’t need to stand for this. Check out your own credit rating with a company such as Equifax or Experian. Take the proof with you, and they won’t be able to trick you into less favorable terms on a loan.
However, it might be the case that your credit check gives you bad news. It’s a hard fact that a low credit rating makes it harder to get cheap car loans. But your credit rating isn’t set in stone. If you can wait a little while before buying your new vehicle, you should take some time to repair your credit rating. Your credit report should give you an idea of why the rating is low, which will help you to improve it. Sometimes you already know why your credit rating is low – it’s because you’re already in plenty of debt. This means it’s time to develop a debt management strategy. Other times, your credit rating is low for silly reasons – for example, because you moved house and never received a bill, and that unpaid bill is sitting on your file as a black mark against you. Chasing up unpaid bills – even if very small amounts of money are involved – is key to repairing yo ur credit rating.