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Preapproved Loans... Page
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Shopping for Financing
It is critical to shop for financing in almost every situation, even when planning to use
a special automaker incentive rate. This shopping is easy to do and can be done over the
phone or online by calling or visiting the web sites of a bank, credit union, financial
institution ( http://www.peoplefirst.com ) or the
automakers. Car loan rates are even advertised in newspapers. The loan shopping process
requires you to have to have a pretty good idea of the cost of the car you want (with all
the features you'll add and their costs) as you need to know how much money to ask for.
Then the financial institution will evaluate your ability to pay the loan based on your
other financial responsibilities Ask the following questions and get the answers in
writing:
- What is the interest rate charged on the loan?
- What are the fees associated with the loan? What are they called and how much is each
fee?
- What is the Annual Percentage Rate (APR)?
- What is the total cost of the loan over the term (number of months for which you are
borrowing the money for)?
- What method do you use to calculate interest?
You can create a grid to compare lending institutions:
Comparative Loan Information
First establish the following information:
- Car Price (all costs):
- Down Payment:
- Amount to Finance:
Along the top row, place the institutions you intend to compare:
- Company A.
- Company B.
- Company C.
Down the side, place the following items to compare for each institution:
- Interest Rate:
- Method:
- Fee:
- Fee:
- Fee:
- Total APR:
- Monthly Payment:
The grid will enable you to compare each borrowing opportunity to see which one is
really giving you the best deal. It will also tell you when you may be over charged and
what rates are appropriate to your credit history. The better your rating, the lower the
interest rate you will pay as you are a better "credit risk." The more likely
you are to pay your loan, the less you will be charged for it.
If you want to research your credit history, you can get one free of charge, once a year
from Experian (they used to be TRW) and you can get one whenever your credit is checked by
a finance company. Experian's web site is athttp://www.experian.com
. And, it pays to check your credit history every once in a while. Sometimes there are
reporting mistakes that you can correct to more accurately reflect your payment history.
It is important not to take the monthly payment numbers at face value. Two lending
institutions offering loans at the same monthly rate can be very different. Each can
include fees that other lenders don't charge -- or charge less for -- and the terms may be
different. Given the same interest rate, a 48 month loan at $299/month only saves $12.00
over the $399/month loan for 36 months and you'll save a whole year of interest on the
shorter loan for only a $100 a month increase in your payment. If you keep your money in a
savings account, you'll likely only be earning 3 percent interest. You might as well pay
off the car loan faster as the interest rate is higher.
To learn what the monthly payment will be for the specific amount you need to borrow, use
the free PeopleFirst loan calculator at http://www.peoplefirst.com/
loancalc.shtml
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