If you want a new car and do not have the cash available to pay for it, then you will more than likely need to finance the vehicle with the assistance of a company that offers loan services. And, there are many different ones that offer financing, so it may be difficult to figure out which one to use. Keep reading to learn about a few things that you should be looking for in your loan.
Prepayment Options
Depending on your financial situation, you may decide to carry your loan across the full term. However, if you have the option, then you might also decide to pay it beforehand. Making double payments is a good way to do this and so is sending the loan company one lump sump for the remaining balance. However, some loan companies will not allow you to pay off the loan in advance without paying some sort of penalty. Some loan companies will indicate that they charge a prepayment penalty right on the loan paperwork. Others will call the penalty something like a service fee for prepayment.
Make sure that the finance company you choose allows for the payment of the loan in advance without penalty. If there is a penalty, then you should know that some are more costly than others. Flat fees are often the cheapest and are only a few hundred dollars, so this could still work out in your benefit depending on the type of interest rate that you can secure. Percentage penalties are usually a bit more expensive and are charged based on the amount that you still owe on the loan or the amount of money that the financing company will lose in interest if you pay the loan back early.
Insurance Choices
If you have a mortgage, then you likely have a special type of insurance that allows you to miss one or several payments in situations where you lose your job or become disabled. This is a type of either disability or life insurance and it guarantees that you will not lose your home in the case of a life emergency. Well, some auto finance companies offer the same type of insurance. And, if you are purchasing a relatively expensive car, then it is something that you should look into.
Like the insurance on your home, the one on your vehicle will be relatively inexpensive. And, the small cost will help you to avoid repossession and a ding on your credit report if for some reason you cannot make a vehicle payment.
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