SMART Tips for Saving on Your Auto Loan

Americans love cars. It is one of the reasons why America is amongst the world's top car-owning countries. Every year, Americans spend several thousand dollars on auto loan payments. If you are looking forward to buying a car, make sure that you follow S.M.A.R.T. tips. The tips will help you save money and ensure that you do not opt for exorbitant auto loans.

Follow the S.M.A.R.T. Tips and Save Money

When car buyers have to make a decision about auto loans, logic takes a backseat and emotions become a controlling factor. It is the reason why car buyers say yes to financially harmful auto loans. To save yourself from the possibility of a financial damage, you must follow the tips.

S - Specific

The car is a huge asset. So, it is essential that you understand your requirements before buying a car. It is important that you have a specific image of the type of the car that you want. It will help you stay away from an impulse purchase. Consider the list of following factors because it will help you in choosing your perfect car:

1. Total number of passengers

2. Gearbox - Automatic or manual gearbox?

3. Cargo capacity

4. Vehicle performance

5. Driving conditions

6. Gas mileage

7. Safety features

8. Technological features

9. Parking space

M - Money

Remember that even if you opt for an auto loan, you will need to make a down payment of at least 10 percent of the total price of the car. Down payment is beneficial because it helps in reducing the loan amount. If you do not have money for down payment, do not worry. You can trade-in your old car and ask the dealer to deduct its value from the price of the new car.

A - Affordable

Selecting a specific car will be of no use to you if you cannot afford to buy it. Remember that car expenses are not limited to down payment. You will have to pay money for monthly loan payments, fuel charges as well as maintenance expenses. A general rule is to allocate no more than 20 percent of your total monthly income for car-related expenses. Keep this rule in mind and choose an auto loan that does not exceed your budget.

R - Reliable

There was a time when car buyers applied for an auto loan with the local bank only. Today, there are several ways of obtaining an auto loan. You can apply with a bank, a credit union, or an online auto financing company.

No matter what option you choose, you must ensure that the lender is a reliable one. If you opt for an online auto financing company, check the website's security certificate. If the website doesn't have one, stay away from it and save yourself from a potential identity theft.

T - Time

Car buyers are afraid of rate shopping because they believe that multiple credit inquiries will damage their credit score. But, do not refrain from rate shopping instead, finish it within 30 days. Why?

A time-bound search for an auto loan will ensure that you do not harm your credit score. FICO does not consider inquiries made in the 30 days prior to scoring. So, if you are able to get a loan within 30 days, it won't affect your score. This span of time can change to 14 days if the lender uses older versions of FICO and can increase to 45 days if the lender uses the newest formula.

Car buying is one of the most expensive purchases that Americans make. If you do not pay attention to your auto loan, you can make the worst financial mistake of your life. So, avoid making a bad decision and follow the S.M.A.R.T. tips.

Car Financing: What Kinds of Cars Are Rejected by Lenders

Every perfect thing requires time. And, finding a perfect car requires a lot of time and patience because you have to find the right combination of beauty and technology. Won't you feel irritated if lenders reject your car and all your hard work goes to waste?

Why will Lenders reject your Car?

If you want to buy your chosen car quickly, you must know about the kinds of cars that are rejected by lenders. It will help you in making a decision and ensure quick completion of the buying process.

Extremely Cheap Cars

Today, the car prices have become obnoxious because of rising inflation and increased government regulation. Finding a car that is within your budget can be a difficult task. But, if you manage to find an extremely cheap car, don't think lenders will be happy. They will avoid financing because of the following reasons:

1. Cheap cars are damaged or totaled.

2. Usually, they are very old to function.

Also, lenders make a profit from the interest amount that you pay. If they approve a cheap car, they will not be able to generate enough profit from the interest amount. So, they avoid financing an extremely cheap car.

Extremely Old Cars

Old cars demand regular repair and require frequent maintenance trips to the mechanic's garage. If you buy an extremely old car, you will have to spend a large part of your income on repair. It will make regular monthly payments difficult and also, increase the risk of missed payments. So, lenders will not support your decision of buying an extremely old car.

Remember that lenders do not provide financing for cars that are older than 8 years. They also prefer less than 100,000 miles on the odometer.

Extremely Expensive Car

Lenders have to consider the risk factor while approving your loan application. If they approve an expensive car and you do not make regular payments, they may incur loss. So, they shy away from financing an extremely expensive car because they know that it is unwise to put all eggs in one basket.

Antique Cars

If you are an antique collector and want to buy an antique car, you will face difficulty in acquiring it. Lenders do not fund an antique car because:

1. It is challenging to find its accurate market value.

2. In the event of repossession, it becomes difficult for lenders to sell it.

Race Cars

Racing is a risky sport and several cars are damaged during the racing events. If your race car is damaged and totaled, it will be very difficult for lenders to recover money from you. So, they do not approve such a high-risk asset.

How to Deal With An Auto Loan After Divorce

Divorce is not only emotionally difficult for you but it is also difficult for your financial condition. How?

When a marriage ends, individuals split assets and go separate ways. But, what happens to liabilities such as an auto loan?

In an ideal world, both the individuals assume the responsibility of the debts they created and part ways. Unfortunately, the reality is different. So, take care of debts after a divorce.

The Legal Liability of an Auto Loan

Do not believe that just because the divorce agreement holds your former spouse responsible for the auto loan, he/she will make regular payments. It is plausible that he/she may not make payments.

You must remember that the divorce agreement is separate from your loan contract. Lenders do not give importance to the divorce agreement. Your former spouse may be responsible for the loan in the eyes of a court. But, if you applied for a joint auto loan, lenders will hold you accountable for the loan as well.

How to manage an Auto Loan after Divorce?

It is important to remember that your marriage may be history, but a loan will continue to affect your present and future. Here's how you can manage your auto loan and save your credit score from plummeting.

1. Get rid of the Loan

After a divorce, the best way to manage an auto loan is to get rid of it. If your former spouse is responsible for making payments, the loan should be in his/her name only.

But, remember that no lender will remove your name from the loan contract because of your changed marital status. So, your former spouse will have to refinance the loan and complete the loan process individually.

2. Get rid of the Car

If you are worried about refinancing the loan, you can sell the car and pay off the lender. It is possible that an upside down loan situation may force you to pay money to the lender, but it is important to understand that a loss today is better than constant tension forever.

3. Make sure the Lender gets paid

If your former spouse is responsible for the loan and both of you decide against selling the car, you will have to make sure that he/she makes the payments regularly.

If your former spouse doesn't make payments, contact your attorney. It is possible that you will have to make a couple of payments to avoid any negative impact on your credit score. So, keep aside a part of your income for it.

Taking care of your auto loan might be the last thing on your mind. But, it is important to understand that your marriage is over and not your auto loan. If you don't manage it effectively, you may ruin your credit score forever.

Before You Get to the Car Dealers: Getting an Auto Loan

So, you have a new automobile in mind, but you don't have quite enough money on hand to pay for it in cash. It is time to take out an auto loan. Auto loans are a great way to help you get in the vehicle you want. The process of taking one out might be a little daunting, so here are some tips to help you with the procedure, from checking your credit score to finally driving home.

Credit Score

Before you begin visiting local car dealers to pick up the perfect vehicle, you should take a look at your credit score. This number will play a big role in whether or not you will be approved for an auto loan and at what rate. There are several websites that provide free credit reports to help keep you informed of your credit score. Find a site that is easy for you to navigate and use it to check your score often. Your credit score changes month to month, so your soft credit score might go up while you are looking at automobiles.

Determine Your Payment

After a home, an automobile is usually one of the biggest undertakings a person will assume. In order to be a smart buyer, you should determine how much of your income can be spent on your new purchase. Keep in mind that, along with loan payments, a vehicle will need insurance, gas, and regular maintenance. A good percentage of your income to spend on all of these related expenses is about 10-15%.

Seek Pre-approval

Just like for credit scores, there are several opportunities for auto loans that can be accessed online. Many of the nation's top insurance companies offer pre-approval applications through their websites. It is also a good idea to check with your local bank or other financial institution. Since the bank will be a little bit more familiar with your unique financial situation, they might be able to offer you an improved rate or payment than other companies. Finally, some car dealers offer financing help through the dealership. If you have a particular retailer in mind, contact their financial office to see if they can help you navigate the process.

Pick a Vehicle

This is the fun part of the purchase: choosing what vehicle best suits you. Keeping your allowance in mind, you can begin shopping at nearby car dealers for something that fits your style and needs.

Paperwork

Once you've made your decision, you have to go through the process of filling out all of the paperwork. Representatives from the car dealers will be helpful in this period since they have to do it on a regular basis. This representative will work with your lender to finalize the loan for the vehicle, as well as help you get the necessary warranties or protection for your new purchase.

Now that you have completed all of the steps in securing your auto loan, the only thing left to do is drive your new vehicle home from the car dealer.