How to Save Money on Car Loans
The loan you are going to spend for a next car can save your money if you’ll be competent in shopping and avoid possible pitfalls. Here are some tips that will help you:
Use Your Ownership Capital
Home equity line of credit (HELOC) and a home equity loan can significantly lower the interest payments for a car loan. Both these loans are secured by the borrower’s property so they require lower interest rates than unsecured car loans. The interests on such credits are often not liable for taxes if they are detailed in your federal tax income. Discuss this particular position with a tax consultant.
HELOC usually has lower interest rates than a home equity loan, but as its rates are changing your loan can suffer from payment raise caused by rates increasing. That’s why HELOC is more widespread for car credits for less than 36 months – for longer terms home equity loans with fixed interest rate are used as they have a guarantee of stable payments during their term.
Before you consider getting these types of car credit you should consider the risks, associated with this sort of financing. As you are using your house as collateral, it’s extremely important to make all required payment accurately without delays otherwise you can simply lose your house.
Organize an Independent Financing
If you can get an independent lender that will supply you with money for buying a car, you can also save money. Financing provided by auto-dealers often costs more than auto loans provided by bank. Auto-dealers can even obtain more profit from lending money for a car than from selling this car.
The majority of auto-dealers will try to find out the amount of payments you can pay per month. This information can help them raise interest rates to the sum you’ve indicated. They can then resell your credit to a bank and get a commission as a difference between your regular payments and rates of the bank. Of course, this situation can be too expensive for you. For instance, auto credit with $20,000 provided for 48 months can bring an auto-dealer nearly $900 as the difference between 7 and 9 percent interest rates.
No Interest Credits – Keep Your Eyes on the Ball!
Although car loans with zero interest may seem advantageous to you, these advantages can turn to extra payments if you have to return a significant amount. For example, you purchase an auto for $16,000 and get a car loan with zero interest rate for 36 months and $2,000 in rebate. In this case your monthly payment is $444.44. If you take a credit in a bank with 5 percent interest rate, your monthly payment is nearly $419.59. This option saves $24.85 of your payments per month, and $894.6 over three years.
Verify Your Credit Account
Before turning to auto loans don’t forget to check your credit history and score to correct any inaccuracies that may damage your credit score. In case you’ve been planning to buy a car for some period, you can try to make your credit rating better – you can delete some unpaid bills of credit cards as they may spoil the general picture. Lenders usually quote interest rates according to your credit rating. So, repaying some debts and improving your score can help you get more attractive rates.
Think about Leasing
Leasing was very popular in the 1990s – it gave people opportunity to start using an auto and to buy it step-by-step – they paid less per month than for buying it at once. As you don’t pay the whole price of auto, your regular payments for leasing are less than regular payments for credit. New models of some autos can be leased for $200 per month. One of significant disadvantages is that your car usually doesn’t have any value in the end of the leasing period. Consult with leasing experts before making a decision. Make sure you have learned all conditions of leasing agreement to avoid extra payments. You should also try to make the largest advance payment for lower interest rate.