Loans Blog

It's 4th of July weekend. The weather is hot and the skies are clear. Life is looking pretty good right about now. One thing you have had on your mind lately is buying your first brand new car! You have some money saved up, and what better weekend could there be to cruise around in a shiny new car? It's time, the old beater needs to go! Now that the decision is made, the real world impact of buying a car begins to set in. How should I go about paying for this? What loan should I take out? I thought I would save a few of my blog followers from years of paying back debt and explain a few helpful hints about taking out a car loan.

As you may or may not know, the cost of being a car owner is significantly high in this hard economical time. One way to help manage these costs is to plan to pay off your car loan in a longer period of time than normal. This would entail paying back your loan over a six or seven year period rather than a standard 3-5 year plan. This sounds like a wonderful idea at first with monthly rates significantly lower that normal. However, the long term payment plan is not always the best option. Paying off a loan in this longer time frame has its risks, with the main one being higher interest rates. If you took out a 72-month loan of $20,000 at 6.75%, you would have to pay around $4,500 in interest rates. The same amount of money, but only a 48 month loan at 6%, would have around $2,500 in interest payments. That is a significant amount of cash. You could buy a few more hot dogs for the 4th of July BBQ with that money! Another risk that you may run with this type of payment plan is paying more interest per month while at the same time paying less of the loan principal. This means that in the end you will end up owing more than the car is even worth.

Here are a few tips so that you do not run into these payment problems. 1. Get pre-qualified for an auto loan. This move could possibly get you a better interest rate and lower month payments that the dealer would offer. 2. I'm not sure if this applies to any of my readers, but take out a home equity loan. This could allow you to borrow money at a lower interest rate, and the loan is insured by your house, the interest may possibly be tax-deductible. Whatever that means? 3. Do the proper research. Make sure to know all the numbers before you decide to take on a loan. Know which payment plan makes the most sense for you. Also, make sure to read all the fine print. What are the fees and conditions of the loan? This may not seem important at the time, but I assure you it is. 4. Increase the amount of your down payment. The more money you are able to put down, the better chance you have to take out a short-term loan. This will end up saving you money in the long run. 5. Only buy what you can afford. If you want to take out a long-term loan, it may be because you can't afford the car. Be smart.

Once again, it's 4th of July weekend and you have permission to splurge. Eat all the hot dogs your heart desires, set off as many fireworks as humanly possible, and if the time is right, maybe even buy a new car. However, make sure you choose wisely and make the most informed and responsible decision you can!