How to Choose an Auto Loan
When you receive quotes on your easy online auto loan, you need to know what to look for in order to make your decision. Here are the main features you'll want to compare in choosing the right loan for you.
- Total up-front expenses. These are the fees and charges you'll have to pay up-front when you take out your easy online auto loan. Such charges might include origination and processing fees. Itemize and add up these up-front costs for each loan to help you compare them easily.
- APR (annual percentage rate). This number is the best representation of the true annual cost of your easy online auto loan. APRs include interest rates as well as all up-front and ongoing fees and charges. You will see the APR expressed as a percentage of the principal of your easy online auto loan. You want the APR to be as low as possible. Federal law requires all lenders to compute APR the same way, so it is a more valid basis of comparison than interest rate alone. Your lender is also required by law to disclose the APR in bold in your customer agreement. When selecting your easy online auto loan, make sure you compare APRs because it can help you weed out loans with ostensibly low interest rates but sky-high fees and charges.
- Total cost of the easy online auto loan. The total cost of your easy online auto loan will include all of the monthly payments you'll make in addition to any fees and charges. This number will include your interest expense over time as well as fees and charges, so it is a more valid comparison than monthly payments alone. For example, if you select an easy online auto loan amortized over 60 months, your monthly payments will be lower than with a 36-month loan. However, the total cost of the 60-month easy online auto loan will be greater because of interest expenses. Usually, it is a good idea to avoid an easy online auto loan with excessively long terms. You will end up owing more on the car than it is worth almost immediately. Try to stay at 36 months or below, but especially avoid loans with 60-month or 72-month terms.
- Early payment privileges. If you choose to refinance your car or simply find that you're able to make more payments than you thought, you will need to know what kind of early payment privileges your easy online auto loan offers. Some loans limit borrowers to how many extra payments they can make per year, if they allow additional payments at all.
- Prepayment penalties. Some lenders will charge prepayment penalties on your easy online auto loan if you pay it off prematurely. Usually, this is a percentage of your outstanding balance or a few months of interest payments. Keep prepayment penalties in mind as you select your easy online auto loan.
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