People will spend months or even years planning to buy a car.
They will work hard to build good credit. They will search for
just the right make and model. They will scope out the various
dealers and sales staff sometimes even comparing service
departments too. Then they will sign on the dotted line for the
first loan the sales person offers.
What is wrong with this picture?
It is important to remember that if you have good credit then
you are a dream customer to most lenders. Even if your credit is
not perfect you are still an attractive client for many lenders.
Repeat this mantra whenever a lender acts as if they are doing
you a favor by lending you money: I am going to give them a lot
of money. Yes, you are. They can negotiate a sweet deal (sweet
for them) and then turn around and sell that loan within the
year and make a quick profit. Even if they don't sell your loan
they will make money off you for the next three to six years as
you pay interest on your original loan. They are not giving you
anything. This is a business deal and the lender stands to make
a lot of money so you need to protect yourself to get the best
deal you can.
While most lenders tend to make you think you should be grateful
to them for taking this huge risk on you, it really is the other
way around. A lender can't lose. If you honor the deal they will
make a lot of money and if you don't honor the deal then they
simply take your car back and keep the interest you paid in the
However there is an even bigger fallacy that lenders like to
perpetuate. They don't want you to know how desperate they are
for your business. Look around and you will realize the truth of
this. Check out the television, radio, and print ads that abound
and you will see that lenders are getting pretty competitive.
That is why you simply must shop around to find the best car
loan available for you. In the end you could save yourself
hundreds of dollars. Here are five ways to help you find the
~ Shop around - Get quotes from various lenders. Look at local
and national lenders and don't overlook the internet.
~ Compare terms - Interest rates vary from lender to lender but
lenders offer different interest rates depending on the terms of
the loan. How long will it be ? How will you make payments
(electronic or check)?
~ Tweak some of the optional items that you control, such as
the type of insurance you will carry.
~ Adjust your down payment - Sometimes being able to increase
the percentage of what you are putting down can make a
difference in the lenders terms (similarly buying a less
expensive car will work the same)
~ Haggle - Yes! Lenders often act as if their rates are written
in stone but this is not the case. This is where shopping around
can really come in handy. If you can show that you've got a
slightly better deal with another lender then sometimes another
lender will lower their rate to beat the competitor. Hey it's
worth a try and it recently worked for me!
Just remember that you are in control of your future. You can
choose whether or not to accept a lender's terms. There are a
lot of lenders out there so you do not need to sign with the
first offer you receive.
One last hint: It might be best to go through this process
before you've found the car of your dreams! You can get
preapproved for a car loan with many lenders and that removes
the pressure and worry of losing the car of your dreams while
you negotiate with a lender. It also puts you in the driver's
seat when you are negotiating to buy that dream car when you
finally find it if you already have a loan ready to go.
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