Finding yourself stressed out because you're stuck in a bad auto loan? We've done some research on the options you have as a borrower and, as always, bring the answers you need now to our blog.
According to figures published by LendingTree.com, you probably have a car loan regardless of whether or not you knew what this blog post is about because nearly three out of four Americans purchase their cars using a loan. Sounds startling? So are the rest of the statistics. The dealership auto loan business generates $500 billion dollars in loans each year – with the profits coming from sky high interest and fees charged by greedy car dealerships and lenders.
First, let's start with some of the ways us borrowers can avoid the high costs associated with auto loans and the risks we run by borrowing outside of our budget at interest rates we can't afford. As borrowers who are in deep debt trouble, we must first recognize the behavior and actions that got us to where we are today if we are to rectify and emerge from whatever our predicament may be as a smarter, wiser consumer.
First of all, not all loans are created equally. Getting a pre-approved loan can save you precious annual percentage yield points and perhaps even lower the overall amount you'll spend on the car in the end. The other option is to sign a loan with the auto dealership that may or may not have your interests in mind at the height of your transaction with a high-pressure car salesman. With a pre-approved loan in hand, a dealership may be more inclined to make the arrangement a little sweeter for you either by beating the interest rate the bank has approved you for or with some other discount or fee-dropping. How about those manufacturer rebates the salesman love to dangle to potential car buyers? If the rebate boasts more than $1000 cash back, take it – especially if you have the option between a rebate and 0% financing. While the absence of interest on your car loan sounds plush, less than a third of those who apply get approved and only about ten percent of buyers actually seal the deal.
You can also back your loan with the equity you own in your home (if you qualify). This loan is secured on the amount of paid up equity you own at the time of the application. Visit your bank to learn more; each loan originator or institution may have different conditions.
For the future, know that interest rates are almost always lower on new cars over used cars, and if the car is old enough, financing won't even be an option. There are many variables that exist when trying to determine whether or not the stack of papers the salesman is pushing towards your side of the table accompanied with a shiny pen is really a good deal or not. A good rule of thumb is to just know exactly what it is you're paying, and shop around! There's no reason why you should ever take the first offer from the first dealership for the first car you've think you want. Trust us: it will pay to shop around for now, and for the future.
If you're currently locked into a loan that you're unhappy with, here are some guidelines you can follow to determine what options you have going forward.
Delinquency rates among consumers with outstanding auto loans are rising, unfortunately more so in the wake of the most severe domestic and international recession the world has ever seen. Should you find yourself facing a higher-than-expected monthly payment, you're not alone. Talk to a qualified Debt Settlement company to help you renegotiate what you can pay each month. Lenders will be willing to restructure either your payment date due or perhaps even the amount, but those talks will not happen with you. They would rather speak with a specialist who represents several clients and several loans all at once, so go ahead and ask for a free consultation with a competent debt settlement company.
Determine how much each month you can pay, structure a plan to make those payments, and above all else make sure you're being realistic – making promises and commitments you can actually keep will help you avoid bigger issues down the road. At the same time, it may be helpful to take a detailed audit of your personal finances. In what other ways are you likely spending too much money each month? While only you can determine the how and when to answer that question, the point here is that you may find it necessary to cut out the three to five meals you enjoy dining out each month if it means you'll avoid repossession due to non payment. Repossession can result in extraordinary fees and costs that will only make your situation worse; much worse in fact.
If you've got the cash and just want to get out of the sticky debt quicker, sending in as little as an extra $50 a month above and beyond your minimum payments can make a substantial difference in the amount of money and time you'll pay in the end. But borrower beware: taking out a cash advance or payday loan often comes with insane interest rates and terms and would not be a recommended option for paying down your loan.
In the end, the most influential option for borrowers who are overwhelmed by their auto loan payment would probably be refinancing. Refinancing your auto loan works the same as refinancing your home mortgage, and is nearly guaranteed to leave you with a lower interest or minimum loan repayment amounts afterwards.
In my research, I have found many "do it yourself” online programs, CD's, video tutorials, books, and other instruments for refinancing your own auto loan on websites that looked, well, let's just say less than professional. I even found a website that, among other "software” offerings, would give you a license to download a program that will allow people to open up an "auto-refinancing company” so that you can take out car loan modifications for people. I'll prefer to keep my comfortable distance from the people that own these websites, thank you.
With government and Federally-set interest rates at all-time lows to spur business and consumer lending in this dreadful economy, now really is the best time to consider auto loan refinancing. Even if you're not behind on your payments, refinancing can be a smart option for the informed borrower, but make sure you take the time to speak to a qualified company that your confident can handle the complexity of the negotiations in your favor, not the lender's.
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