We’ve seen a lot of Houstonians fail in their auto loans. It’s either they couldn’t make the payments or are regretful about the kind of car loan they ended up with. It’s actually a result of wrong decisions made during the application process. We don’t want you to experience the same. So, avoid these common mistakes car buyers tend to make when taking out an auto loan.
Mistake #1: Ignoring Your Credit Report
One thing that can happen to you when you don’t pull out a copy of your credit report before applying for an auto loan is getting a ridiculously exorbitant interest rate. When an unscrupulous lender finds out you haven’t seen your credit report yet, they could lie about your credit score so they can charge you a higher interest rate that you don’t deserve.
It’s important to be familiar with your credit standing before applying for an auto loan. It not only educates you but also protects you. Also, you don’t have any excuse. The federal law requires Experian, Equifax, and TransUnion to provide consumers with free copies of their credit reports upon request. You can make a request through AnnualCreditReport.com. You are entitled to a free copy every 12 months.
Mistake #2: Financing the Car You Want
What’s wrong about picking the car you want? Actually, nothing. But it becomes a mistake when you prioritize your wants or personal preferences over your needs when choosing a car. You tend to go for the more expensive vehicle when you choose a car based on your wants rather than on your needs.
Take this lesson to heart especially if you have bad credit. Your car choice must be realistic or something that would not be in conflict with your credit and financial situations. Lenders may not want to finance your luxury car after showing them your poor credit standing. Moreover, you get the most benefit when you opt for an affordable car that has all the features you need instead of a fancy, pricey car.
Mistake #3: Extending the Loan Term
Going for longer auto loan terms has become a trend. That’s mainly because lower monthly payments are more attractive to car buyers these days. But experts are concerned about the overall cost car buyers actually pay on these loans.
Think about it: Longer loan terms reduce the monthly payments. But don’t they also have higher interest rates? An auto loan calculator can clearly show you the difference in total payments between a short loan term and a long one. (Try doing 48 months versus 72 months.)
Mistake #4: Ditching the Contract Review
We know loan contracts and other paperwork involved in auto loans can be plenty and boring. But it’s important that you read the contract carefully before signing it. Sometimes, the lender you’ve been talking to is reliable and trustworthy until they secretly included other terms in the contract. You would never know about these alterations if you don’t read the contract before signing it.
Make sure that every term and detail agreed upon during the negotiation is clearly spelled out in the paperwork. Dispute inconsistencies and never walk out of the office without understanding everything written in it.