Decode Auto Loan Financing in 5 Minutes
Cracking the case of low-cost auto loan financing can take serious detective work. It's not always clear how loan details will affect your budget. But you don't need to be a master sleuth – there are simple steps you can take to find the best deal.
Analyze annual percentage rates (APRs) to clarify borrowing costs. APR measures the total cost of borrowing, including interest rates plus fees. It’s the actual yearly cost of a loan as a single number. Lower APRs result in lower monthly payments.
Place APRs, along with the words listed below, under a magnifying glass as you examine various dealer promotions:
- Principal – Amount of money you borrow that does not include interest charges or fees.
- Loan term – Number of months or years the lender gives you to repay the loan.
- Prepayment penalty – Amount the lender can charge if you pay off the loan before the end of the term. NOTE: Some lenders, like SAFE, do not charge prepayment penalties.
- Gap insurance – A form of auto financing insurance that protects you if the vehicle is totaled or stolen. It covers the difference between the vehicle’s fair market value and the amount still owed on the loan.
Understand the financial impact of repayment lengths. Along with APR, the loan term affects what you pay overall. The longer you take to repay the loan, the more interest you will pay. Choosing a shorter term can save thousands in interest charges over the life of the loan. However, longer terms could make monthly payments more affordable.
Check credit reports before submitting a loan application. Knowing where you stand before applying for the loan gives you time to remove data errors that might appear in your reports. Inaccurate, negative information lowers your credit score, a key factor in loan approval.
Visit AnnualCreditReport.com to request reports from each of the main credit reporting bureaus. Follow each bureau’s dispute policies to have errors removed.
Figure how monthly payments align with future plans. Large monthly payments could delay long-term financial goals. For example, signing up for a higher monthly auto payment leaves less money to save for a down payment on a new home.
Toss your trench coat and slide into the driver’s seat of your next vehicle with SAFE’s budget-friendly auto financing. Competitive APRs, flexible terms, and special payment options might have you cruising down the highway sooner than you think. Apply today!