Car Loans For Dummies

2007-03-08 10:33:40

( Automobiles )



In this day and age, no one can deny the convenience and comfort that a car brings. And because you're not like Paris Hilton who can buy a Porsche on a Friday whenever she feels like it, you will have to avail of a car loan like normal people.

The rule of thumb when applying for a car loan is simple. Always try to get the shortest loan term that you can afford. You may be tempted to prolong the term, because you would rather pay a smaller monthly amortization. Instead of paying for your loan just a year, you choose to pay for it for five. Pretty soon, the high interest will turn around and bite you in the behind, and you will realize that the money you've paid for the secondhand car could've paid for a brand new vehicle.

The best car loan rates are usually given by credit unions, which give 1.5 percent less than bank rates. Aside from this, a great piece of advice to consider is procuring a simple interest loan instead of an installment one. Installment loans ask you pay interest for the entire loan and not on the remaining amount of money to the lender. Let's say that you only have a $1000 balance on your car loan, you will still be paying the interest for the original loan of $5000. You best steer clear of this kind of situation by going for the simple interest loans instead.

Lastly, mull things over carefully. Don't buy a car if you cannot afford it or are paying off a $3000 credit card bill. Oftentimes, we get blinded by the flashing lights and the big sale sign on the shop window. Don't bite off more than you can chew, because before long, you may find yourself drowning in all your bills.


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