Car Loans

There was a time when if you wanted a new car, you went down to the dealership, laid out the cash and drove out with your new car. Well, these days, with new cars costing twenty, thirty, forty, fifty thousand dollars and more, not many people can self finance anymore. So if you are going to buy a car, you will most likely need a car loan.

Car loans usually come from banks or credit unions. You can also get car loans from finance companies and you can get car loans from some of the bigger car manufacturers’ financial departments and sometimes, even the car dealership itself when they can afford to do their own financing. When getting a car loan, the better your credit rating is, the lower the interest rate you will have to pay on the car loan you take out. Car loan rates fluctuate with the prime interest rate and also vary depending upon the perceived risk of the loan. The prime interest rate is the interest rate the Central Bank charges its best banking customers so your car loan rate will always be at least a few points higher than the prime rate.

But if you are perceived to be a good credit risk, then your car loan shouldn’t be more than a few points over prime. Now if you have some kind of problematic history with credit, you could end up with a very costly car loan. The less credit worthy customers may not even be able to et their car loan through a bank or credit union and may have to get their car loan through the more expensive sources who deal with risker loans. When it comes to car loans, as with any loans, the greater the perceived risk to the lender, the greater the cost of the car loan to the borrower. And when getting car loans from these sources, watch out for all the hidden clauses and special fees because the extra charges on these car loans can really add up.

So before you sign on the dotted line, make sure you have read and understand all the terms and conditions of your new car loan and if you don’t understand any of the terms and conditions of your new car loan, do not sign it until someone can explain your new car loan to you and answer all of your questions about the car loan.

New cars are nice to have, but bad car loans are not. So if you can’t get a good car loan at a good rate, maybe you should re-evaluate your need for a new car. If the car loan isn’t good, the car might not be worth it.

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