What You Want to Ask About Financing a Car… 5 Questions to Consider
Most people who are looking to buy a car will take the financing route. Leasing does not work for everyone, and the majority
of folks out there don’t have the cash to throw down to buy a car outright. So that means taking a car loan. However, many people treat the process like a pedestrian task – they go in, wait for approval, and sign the dotted lines. But they need to dig deeper. If you are looking for a loan to buy a car, you should consider the idea of ‘what to ask when financing a car’. Asking these questions can clarify much confusion now and in the future.
Clearing the Air
You might nod your head at this advice, but it may still leave you asking one thing – “what do you even ask?” It isn’t easy just formulating questions in your head about car loans, especially if you’ve never dealt with them before. Fortunately, there are a series of questions you probably never thought of before, and they’re worth asking so that you’re not confused as to how things work.
1. Do I have to make a balloon payment toward the end of the loan?
Balloon payments are lump-sum deposits that customers make, typically towards the end of a long-term car loan. This setup helps to reduce the monthly payment amount you’d have to make throughout your term. It’s wise to find out if this applies to your loan beforehand. By doing so, you won’t have any surprises when a higher-than-usual payment surfaces.
2. Can I pay the loan off early? If so, are there any charges involved?
In most cases, you can pay off your loan early, without having to deal with any penalties. Of course, not every lender is the same. So make sure you understand the terms and conditions involved with your particular loan agreement, regarding early (and late) payments.
3. Are there any limitations/requirements regarding my down payment or the type of vehicle I can drive?
As you most likely recognize, no two loans are built the same. And because of that, you can expect some loans to have limitations or restrictions. These can include requirements for an initial down payment – don’t assume all lenders give you the $0 down option. Additionally, some loan companies will recommend certain vehicles (instead of others) depending on the amount of financing you qualify for.
4. If I have bad or unestablished credit, what should I expect?
If you don’t have the best credit, it’s important for you to inquire about your options. Generally speaking, there are loans that cater to individuals with poor or unestablished credit, but they’re certainly different from regular loans. And that’s why you’ll need to ask questions about them. For example, interests rates tend to be higher, and the lender may dissuade you from financing certain vehicles due to their higher costs. All of these are questions you should ask beforehand.
5. Are there additional costs that will be charged on this loan?
Another important question to ask your lender involves the addition of extra costs and fees. Some loans have added charges. These costs may be fees for services provided on behalf of lenders, such as requesting your credit report, or car title application. It’s good to know about these costs early since a lender may ask you to pay these fees upfront.
Importance of Asking these Questions
One of the reasons why we are shocked by certain realities, is due to the fact that we don’t ask enough questions upfront. Financially heavy responsibilities such as paying for an auto loan shouldn’t have unwanted surprises. With that said, the benefits of asking the right questions have undisputed benefits.
You’ll Know What You’re Getting Into
“I didn’t know what I was getting into.” It’s a statement made by many people when they get into an activity or undertaking without preparing for it. It happens to those who get into car loans. Of course, the majority of individuals who are unhappy with the terms of their loans, are the ones who didn’t fully understand it to begin with. And what would have prevented this? Asking more questions. Therefore, avoid making this mistake, by asking good questions from the outset.
Gives You the Option to Negotiate or Back Out
When you’re armed with a solid amount of knowledge, you have more control over your decisions. You can see opportunities and setbacks with clarity. Remember, a loan is a commitment which you have to fulfill, and the consequences of not paying on time will damage your credit profile. The advantage of asking questions early, is that you can negotiate a deal or back out of it completely. After all, you haven’t signed anything yet. Once the loan is in effect, it’s not easy or always possible to negotiate the terms. And as for backing out – it’s too late, you signed it. That’s why curiosity won’t kill you if used early on.
Eliminate the Risk of Payment Hardships in the Future
It can’t be stressed enough, that a car loan is a long-term commitment. Although you can’t see or control the future, you should at least anticipate it, and consider all possibilities. Asking questions guides you to making smart choices in the present. Making better choices now, means you’ll get a loan that’s affordable and gives you leeway if you stumble upon hard times down the road. And in these times of uncertainty, it helps to have a safety net.
Ask Away
You’ve probably heard the phrase, “you can never ask too many questions.” Children understand this very well, and have no issues asking about things they’re curious about, or just don’t comprehend. We tend to lose this quality with age, because some people tell us we ask too many questions, or we’re afraid of looking “stupid”. But when it comes to getting a car loan, there’s no need to feel like you should know it all. There’s jargon and terms that can go over your head, and it doesn’t hurt to have them clarified by a credit specialist. That’s why you should consider what you should ask when financing a car. By asking questions, you’ll find car loans to be far less confusing than they appear.
