Used Car Loan,Best Option

Used Car Loan - What Is Your Best Option?

by Glen Crawford

Purchasing a used vehicle in cold cash is the ideal set up since it will not entail used car loan interest rates to be paid by the buyer on top of the car's value. However, there are people who barely have enough cash but are willing to settle on a used car loan just to own a used car. A used car loan may be obtained from different institutions.

If you are looking for a used car loan but don't know where to start then these tips might help:

For the less experienced buyer, a used car loan offered by some dealers appears to be very attractive, in terms of low interest finance, no deposit and even cash-back terms available. However, upon further examination, the details look far less acceptable. Expect to pay high interest rates for your loan. Long repayment terms are often non-negotiable; it means higher overall cost of the purchase for your used car. When you add to it the fact, that even the asking price is raised for the high risk applicants, the whole idea of obtaining a used car loan, while having a low credit score, is highly questionable. One thing needs to be mentioned though; banks are not willing to lend money for buying vehicles that are not new.

One of the ways to source a used car loan is through the dedicated finance companies. Their lending policies are more liberal than those of the banks. Still, they will require that the correct value of the car is submitted, as it is the loan's collateral. No need to be suspicious. This process is actually beneficial to the purchaser. It helps to preserve the integrity of the deal; in simple terms, prevents you from overpaying the vendor. Regardless who's the lender, your used car loan will have to be based on a deposit; usually 20% of the purchase price. This gives the lender a safety margin, should the loan default, and car had to be repossessed.

Studies also show that getting a used car loan from financial institutions is not really highly recommended considering that most of these companies increase interest rates by five percent. It usually happens when certain used car loan dealerships offer promotions and attractive benefits and advantages. This should make any buyer wary enough to investigate, compare, and check all the other used car auto financing institutions and find out which among them offers the lowest.

As mentioned earlier, you've virtually two sources available for a loan to buy a used car. The first one: banks and credit unions lend rather reluctantly for used cars. The value is usually the problem here, and they expect you to have a high credit score. The second: finance companies and lending co-ops have less restrictive rules, but will charge you a much higher interest: 5-10% above of the bank. The solution: improve your credit score, and ask the bank again.

Be warned that a standard used car loan will not cover all your purchase expenses. There are registration fee and insurance premiums to be paid as well. Make sure, that you've the monies needed. As one of the options, you can include these expenses in the amount of the loan, although it's not advisable, as it will drive your repayment amount higher.

The procedure of securing a used car loan is not always straightforward, and often involves some verbal agreements, done in informal talks. Beware, whatever happens later may cause you a severe financial problems. You must insist that all negotiations leading to a specific loan agreement are well documented. The Consumer Code puts certain obligations on the lenders, but the borrower should also do his/her part of the due diligence.

When you've your used car loan granted, your purchase can be finalized swiftly. Don't forget about finalizing all matters related to your car insurance and registration. Later on, when your credit score improves, shop around for a cheaper used car loan. You may be surprised how much money you will be able to save over the life of the loan, just by refinancing it on a lower interest rate.

Borrowers who were not able to get 0 percent to 3 percent car loan from car manufacturers can actually get a refinanced used car loan. One good tip for a buyer to consider is by looking at the auto refinancing interest rates offered by some sites which may offer at least one percent less interest than the current used car loan interest rate. This should be done as soon as one bought a used car through a car loan. One may use the calculators on these sites for one to determine the percent of savings one can get if he refinances his car loan. This has been the strategy of most buyers to get big savings.