Pierre Money Mart Blog

When the question of getting luxuries for you and the family arises, all our thoughts take a back seat as we are afraid of facing adverse consequences. But this happens when the decision is taken without much thought. Buying a car is one such example. But by taking up a secured car loan and buying a car, you will never repent for the decision.

With a secured car loan, the borrower can buy a new car or even a used car of his choice. The money is obtained by him very easily to buy the car. The borrower can make a decision as to what car he wants to buy, and if it is a used car then it should not be more than 5-7 years old. The car may be useful for any purpose, personal or commercial.

For taking up the loan amount, the borrower is required to pledge the car that is being bought as collateral with the lender. At the time of purchase, the title of the car is made in the name of the lender. When the borrower repays the full amount to the lender, then the title of the car is transferred to the borrower’s name.

Before taking up this loan, the borrower needs to decide the car and his next step should be to look for a suitable car dealer. After deciding on one who is giving the borrower a good deal, the borrower should then apply for the loan. This application can be made through the online mode if the borrower does not want to take any hassle and wants to speed up the process of approval. The money is transferred to his account and he can easily pay the price of the car to the dealer. This loan is also available to the borrowers with a bad credit history.

Borrowers can now easily borrow money for their car purchase through a secured car loan. Possessing a car has not remained very difficult now.

Choose the wrong auto loan and you might drastically increase the chances of defaulting and losing your car. Find out step-by-step how to avoid a money pit.

Car loans are certainly less costly than home mortgages, student loans, or other kinds of loans. So why do so many people end up defaulting and losing their cars? Find out these hidden dangers:

Biggest Hidden Car Loan Danger: The Inherent Money Pit

Unlike home mortgages, student loans or other big-ticket loans, car loans are inherently money pits. A house can build equity; higher education can increase earning potential; even jewelry can sometimes be re-sold for as much as was paid for it. If you borrow to buy one of those things, you may eventually get a return on investment. But every single car loses significant value and keeps losing it as time goes by.

Solution: spend as little on your car as possible.

Of course, in order to spend as little as possible over the life of the vehicle, you need to get a well-made, fuel-efficient car, rather than the one with the lowest price on the windshield.

But a pickup truck, SUV, sports car, or “luxury” model is a guaranteed money-loser. Don’t worry about what other people will think. Think about it: when was the last time you saw an expensive automobile and thought, “I really like and respect whoever owns that!”

The best buy? Many economists actually recommend buying a used car that’s a year or two old. That way you can actually benefit from the fact that cars only drop in value. Even a car that’s just six months old may offer you a substantial savings. Just have it inspected thoroughly so you don’t lose what you’ve saved on maintenance payments.

Hidden Car Loans Danger: Dangerously High Monthly Payments

Unfortunately, most people never figure out the total cost before signing on the dotted

____What you can spend on a car (from           above)
____Amount you’re spending per month on          gas (raise or lower this figure
depending on whether you are getting          a car with higher or lower gas
mileage).
____Monthly maintenance (remember: your          new car won’t stay new long, so
maintenance will be an issue).
____Monthly insurance (remember that for          a new car, your insurance premiums          may go up).
____Tax.

= ____ Maximum monthly loan payment.

Now plug the number above into a vehicle loan rate calculator to figure out big of a car loan, and how much interest you can afford.

Final Hidden Auto Loan Danger: Unnecessarily High Rates

If you simply take the first loan the dealer offers you, you are probably paying too much. Do some comparison shopping on the internet, and bring a list of the best loans with you when you negotiate loan terms with the dealer.

Don’t let the dealer cheat you by shifting the cost from the car loan to the car price to the deal on your trade-in. Make sure you get a good deal overall.

Congratulations! You now are far better prepared to stay out of an auto loan money pit than the vast majority of car buyers. Now you’re ready to go shopping for a loan.

Book Value: the estimated value of any used automobile in a specific region. These estimates are recorded in appraisal guidebooks (i.e. Black Book, Kelley Blue Book) and provide guidance on the value of a car at any given time.

Lemon Law: refers to various state laws that protect consumers against persistently defective automobiles.

Manufacturer’s Suggested Retail Price (MSRP): the manufacturer’s recommended selling price for a vehicle and accompanying options.

Upside-down: when the balance owed on a loan (including auto loans) is greater than the current value of a vehicle.

Shopping for auto loans can be confusing. Buying a car is one of the biggest purchases you will make, so it is important to make a plan before you make a decision. Remember, the person selling you the car wants to make the sale; it is up to you to make sure that you have done your homework so you can make the best purchase necessary.

The first thing you will need is a budget. Don’t buy more car than you can afford. You will need to decide whether a used car or new car is better for you. You will also need to choose between buying a car and leasing one.

When looking for auto loans, you should know your credit score before you start shopping for a car and for auto loans. The more knowledge you have about your credit situation, the less likely you will have a finance officer stick you into a worse auto loan than you deserve.

Auto loans are offered by different sources, such as banks, credit unions, and the dealers’ own finance arms. Make sure to shop around, to get the lowest interest rate and a payment you can afford.