Buying a shiny new car is not as easy as you think. Yes, car loanscan help you get your dream car, but you end up paying a bit higher price than you would otherwise. Financing a new car lets you buy a better means of transport without having to save a lot of money. This may seem attractive, but it can lead to short or long-term financial issues. We are describing a few of them below!
As with any loan, car loans need you to pay an interest apart from the principal. This raises the total cost of thecar, and you end up paying more than the sticker price. Many factors evaluate the interest rate. These factors are your lending institution, economic conditions, and your credit history. If your credit history is bad, you will pay a higher interest rate, and monthly installments. You may have to stretch the payment over a long time to make it achievable. But you may end up paying a higher markup.
Financing a vehicle is not as simple as it seems. When you are an in a showroom, you may want to buy something pricier. Yes, you may have your heart set on something way beyond your range. Hence, you will rationalize the high monthly payment by deciding to cut on saving and investing on the more attractive option. This way, your financial outlook will suffer in the long term.
When you finance a vehicle, you either buy a brand-newmodelor a late used model with high value. You may have to carry a high liability, and physical damage as compared to If you are in a state where you owe more than the worth of your car, you will end up buying gap insurance as well, adding more figures to your dept.
The worst thing about car loans, you put up the very thing you pay as collateral. In simple words, if you fail to keep up with your payments, you may end up losing your car. In additionto losing your car, you will have a black mark on your credit history that you will bear for a few years.
You need to check with whom you are dealing with. Don’t be afraid to have your lender investigated;car loansare a big menace if you end up in wrong hands. So better safe than sorry! You can try state attorney general office or the office of consumers. Ask the Better business bureau or any government agency for their insight you can also do the legwork on your own by finding what the customers have to say about a specific lender.
This is a major mistake most people make. When taking car loans, you need to finalize your down payment amount, interest rate, length of theloan, and the monthly payment. If your financing is conditional, this means they will change later, and you will get screwed over.