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Auto Installment Loans


As soon as we turn 16, we want to buy our first car, regardless of the price, the cost of insurance and operating costs. We just want a car to drive and look cool in, maybe attract the girls and probably most of all have some freedom. No more asking our parents for the family car, which looks like  a family car of course and definitely not cool.

Most of us are able to buy that car sometime in the 4 years after we first obtain our drivers license and we are introduced to the harsh realities of installment loans, oil changes and other repairs that we never thought about. A few young men and some women as well have acquired the skills to repair and maintain their cars themselves, drastically cutting down on the expenses. The rest of us, well we sometimes have to take out an installment loan for the repairs or add to the one we got when we purchased the car in the first place to pay for repairs.

An installment loan for a car or truck is an agreement for a lender to loan you a fixed amount of money at an agreed to interest rate, an agreed to term and payment schedule such that the installment loan is fully paid by the end of the term.

Definitions

Term – the length of time you will take to repay the car installment loan

Interest Rate – this is the rate that interest will be calculated at, the interest is added to the principle of the loan and must also be paid

Principle – The original amount of the loan

Installment Payment – usually a payment scheduled once per month. This is the amount you will pay each month. It includes principle repayment as well as interest repayment.

Negotiating an Installment Car Loan

If you are purchasing your new car or used car from a dealer and financing it through the dealer there are actually two sets of negotiations that must be completed and both are intertwined. The dealer is looking to make money on both the price of the car as well as the interest on the loan. Sometimes these car loans will be completed through a local bank, however the dealer may also receive a finders fee for each loan customer he delivers to the bank.

Obviously you need to negotiate the price of the car, any features you want added, delivery and perhaps free maintenance that might be thrown in. Once you have agreed on a price, then comes the negotiation for your car installment loan. The important parts to pay attention to are the interest rate they will charge you, the overall cost of the loan ( this is the total amount of interest you will pay over the life of the loan) and any registration fee’s that may be levied.

Eliminating fee’s will save you money and if the dealer really wants to complete the deal they may be willing to waive these costs. If you can shave the interest rate even by a quarter percent you will reduce your monthly costs significantly. Some dealers will try changing the term to decrease the monthly payments. While the monthly payments may decline the over all cost will of the installment loan will increase since you will paying more interest charges over the longer life of the installment loan. Pay close attention to this issue and always ask to see the total cost of the installment loan before you sign on the dotted line.

Alternative Installment Loan Sources

Once you have all of the facts regarding the loan the dealer is willing to offer you, take 48 hours to assess the deal and also to find out what your local bank can offer. All banks and finance companies will offer installment loans for purchasing a car or truck. It really comes down to how good your credit rating is with the bank you deal with and what kind of terms they are willing to extend to you. Sometimes your local bank you deal with will provide a better deal if you do a lot of business with then.  Compare the two or three loans you can obtain, checking the term, the interest rate and the overall cost of the loan before making your decision.

Sometimes consumers will also obtain a loan from a family member. While these loans are often at excellent rates, sometimes even interest free, they can have problems of their own. First of all verify that you are actually getting a better deal vs. the local bank and the deal the car dealer is offering. Next you should always write down the terms of the installment loan on a piece of paper and both you and the lender should sign it. Even if you are borrowing from your father it is a good idea to write these things down so that there is no misunderstanding sometime later. Lastly make sure you always meet your installment loan payment schedule. Families fight over money all of the time and there is no sense starting a disagreement when it can be avoided.

One last point about installment loans. When you take a loan out for  a car, the lender will often post a lien against the car. This lien protects the lender should you fail to meet your monthly payments. The lien gives the lender the right to repossess your vehicle and sell it to recover their costs.

Once you complete all of your payments, always obtain a lien release from the lender. You will not be able to sell the car until the lien is released. This can be quite frustrating, if you need to sell the car or if you get into an accident and the insurance company is unwilling to release the funds to pay for repairs due to a lien still being in place against the car.

In summary, verify and confirm competitive details regarding the term, the interest rate, the monthly payment, the fees, the total cost of the loan and the lien before you complete your purchase. Compare with other lenders to make sure you are getting the best deal for your installment loan.



Disclaimer: The views expressed by this author don't necessarily reflect the opinions of Lazerloan.com, it's owners, or it's affliates.



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