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Fixed Rate Loans for Autos: Which One’s Right for You
Anyone involved in car shopping who needs a low rate car loan to get into their next vehicle can see that fixed rate loans are an appealing option for keeping the terms of your loan clear and predictable. With fixed rate loans, it’s possible to use a loan calculator to see your total overall payment over the loan period, because borrowers are assured that the interest rates of the loan will not rise or fall according to the prime lending rate. But there are many different types of fixed rate loans, and some may be better than others. Here are some tips for evaluating your fixed rate loan options.
Third Party Loans Versus Dealership Loans
Some buyers like to go to the dealership and take advantage of special offers on the lot for financing their next car or truck. However, others may be wary of what’s called “dealer markup” or the general practice of padding financing agreements to give the dealer a little more money in their pocket. Buyers always have the option of going through a third party lender, such as a bank or credit union, and going around the dealership for financing rather than through it. Third party loans and dealership loans differ, so shop around to see what’s right for you.
Payments You Can Handle
A family or individual is always encouraged to look at their monthly payment options and select payments they can handle. When borrowers bite off more than they can chew in a vehicle financing agreement, the results can be devastating. Repossession and charge-offs can leave buyers with no vehicle and a growing mountain of debt. That’s why it’s so important to build predictable, affordable monthly payments into your household budget with fixed rate auto loans.
Return Contingency Options
For today’s buyer, who lives in an uncertain world, some dealerships and auto makers are offering special vehicle financing agreements that include a contingency option. That means that if you lose your job within the loan term, a specific kind of financing agreement will allow you to return the vehicle to the dealership and avoid the kind of situations mentioned above. Where defaults on a loan can leave a household with a lot of debt. Return contingency financing is a huge service to those who may not be entirely sure that they will be drawing a paycheck from the same source over the next several years.
Look Critically at Extra Charges and Fees
Some lenders tend to inflate fixed rate loans with extra closing, processing and miscellaneous fees. Evaluate these charges for what they are worth to you, and shop around for lenders who will not add onto a fixed rate financing agreement or otherwise load the scales against you.
There’s a lot to explore in most fixed rate auto loan agreements. Look for an overall picture of how the lender works through a careful reading of the contract, and talk to your participating dealer about what all of your options really mean. Doing the homework on financing keeps money in your pocket and helps all parties avoid unfortunate misunderstandings about the loan agreement.
