A car loan is serious financial business. This financial information will go on your credit history, and it can seriously affect your financial future. Here are some questions you should ask your lender before you sign on the dotted line.
- What is the base rate and annual percentage rate (APR)? How will it change over the term of the car loan? This depends on whether you get a fixed-rate loan or adjustable-rate loan. A fixed-rate loan has a constant interest rate for the life of the loan, but an adjustable-rate loan has an interest rate that changes periodically according to general interest rates.
- Is this the best rate that I qualify for? Ask your lender if you qualify for the best car loan interest rate for that month, day or week. That way you can save money on your monthly payments.
- Will you lock in the interest rate you have quoted, and is there a charge? Your lender should be able keep your interest rate steady for a certain time period so that you won’t have any surprises when your loan payments start.
- What is the term of the loan? This is how long you have to repay your car loan.
- What is the minimum down payment you require? Remember that the larger the down payment you make, the lower your monthly payment will be.
- What will my monthly payment be? This can help you determine your monthly budget including utilities, insurance and other expenses.
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- Is there is a penalty for prepayment? In other words, if you pay off your car loan early, will you be charged a fee?
- What are the fees associated with the loan and what is their estimated total? You will probably be expected to pay some fees associated with processing your information and closing the loan. Ask you lender how much you will be expected to pay so you can prepare your finances.
- Under what circumstances can you demand full payment of the loan? If you are late or fail to make a payment on your car loan, you may be expected to pay the entire amount before the term of the loan is over.
- What documentation is needed? You may need to submit information about your debts, assets and employment.
- How long will the approval process take? This directly effects how soon you can drive off in your new car.