Car Loan, Read the Small Print
A secured car loan allows you to take advantage of the lower interest rates, but be aware of your obligations here. Most likely you will be using your home (or indeed your car) as security toward your borrowings so, if you cease making your repayments, then your lender can use your home to recover their money loaned to you. Purchasing a repayment protection policy, which will then be added to your monthly payment, will help you to avoid this situation. Although some lenders will try to charge them anyway, fees charged to arrange your car loan are not necessary at all, so check the small print. If at all possible, find a lender that will be flexible if you choose to pay off your loan early (i.e. they won’t charge you a penalty payment to do so). Payment holidays can also be an added bonus. You may discover that various lenders will set some limits on what you can do with your car loan. This type of specialist loan requires you use it for the reason that you originally specified so some flexibility could be lost. As an alternative, you can take out a general personal loan.
Coping With Debt
Do you need help coping with debt? Perhaps you have lost your job, or you can’t keep up with credit card repayments. There are several debt solutions available. Here are some hints to get by:
Speak to your Lender
Its vital that you speak to your lender as soon as you realise there is a problem. If you can show them your income and regular outgoings they may be willing to negotiate a repayment plan – after all, getting the money back slower is better than not getting it back at all!
The lender may be willing to give you a payment holiday, where you do not need to make any payments for 3 months – hopefully enough time to find another job and get back on track.
Can the Government help?
Depending on circumstances, you may be entitled to unemployment benefit or housing benefit.
Do you have Insurance?
If your money problems stem from losing your job, you may mind that you have mortgage payment protection – you should check this with your bank. If you have debt with loans or credit cards, again they may be covered by payment protection that you don’t even know you have. A lot of credit cards come with Payment Protection as standard for a few pounds a month – many people end up needing it, and don’t realise they have been paying for it all along.
Car Loan Terms
When shopping for a car loan, it is important to know the definition of the terms you might encounter. Being aware of these terms will help you better negotiate how much you will pay, and understand the dealer’s pricing of the car.
Annual Percentage Rate, or APR, is the most important term to know. This is the yearly cost of your loan, and is similar to an interest rate, but includes other fees and charges. Another is ‘amount financed’, to determine this you need an equation: you multiply the interest rate by the purchase price. Then, you subtract the total from the purchase price; add state taxes and subtract the down payment. This is the amount financed.
Other important terms include ‘dealer charges’, which are the costs the dealership charges for extras such as extended warranty; ‘dealer holdback’ which is a kind of allowance from the manufacturer to the dealer, and ‘dealer invoice’ which is what the dealer was billed for the car. Also be aware of the definitions of: destination charge, factory-to-dealer incentive, manufacturer suggested retail price, or MSRP, mark-up, and monroney sticker price, as they all play an important part in your loan process.