If you are planning to buy a car, how would you like to fund the purchase – from your own pocket or by securing a loan? If you are not so surplus in money backup, it is always better to go for an auto loan. Auto Loans or automobile loans, as it is sometimes referred to, are loans issued by banks to the customers for financing the purchase of their favorite vehicles. As it ties the borrower only to a minimal monthly repayment amount, an auto loan is not going to put any sort of financial strain on the person concerned. Another advantage with having some loan term running at any given point of time is that it helps in tax savings in the tune of hundreds of dollars every year. The only thing to take note of – be responsible and consistent in your earnings and repayments.
Auto loans are generally issued ‘secured by liens’ on the car/vehicle that is being purchased. It gives the much needed security for the lenders on the lent out money. As the repayments are periodically made, the securitization gradually liquidates, and becomes zero when the entire amount with interest is repaid. As prerequisites for applying for an auto loan, the prospective borrower must be above 18 years of age, a minimum monthly earning that exceeding $2,000, a decent residence and employment history, and a good enough credit score. Elaborating on the last point, before applying for an auto loan, make sure that your credit score is 550 or above. Any score below that will invite higher interest rates and lower repayment periods, both of which actually take away the actual advantages of the auto loan. Hence, if your credit score is less than 550, first make amends to it before applying for the auto loan. In fact, other options such as indirect financing and sub prime auto loans are available to circumvent the bad credit/income limit criterions, but ideally such steps must be resorted to as a last straw effort.
Now, from a prospective borrower point of view, before approaching any particular bank or lender, it is advisable to shop around and perform a market study regarding the different loan schemes available and their features, both positive and negative. One can either go directly to a bank and talk to the executive or perform the task online through the internet, all the while remaining in the comforts of one’s own home. In fact, the latter method would be better as there is no physical strain involved and since it is all about browsing through the relevant websites, one could simultaneously compare the different schemes with a few mouse clicks, thus making the research process more efficient and quick.
Once decided on the loan scheme to choose, before putting pen to paper, read and understand all the details, rules, and regulations pertaining to the particular loan. Make sure that none of the fine prints is overlooked. Understanding every nook and corner of the contract helps in eliminating future troubles/confusions. Finally, make the repayments punctually without any default. End of the day, it is all about credit scores and it is better to have the record straight always!