5. Comparing Interest Rates
Comparing the interest rates on various offers is easy when the rates are fixed. With fixed rates, lower is better, period. Things get a little more tricky when variable rates are involved.
Variable rates can change, depending on what happens with overall rates in the wider economy. They can rise or fall, making them more volatile but also potentially saving you money. Variable rate auto loans are somewhat rare, but they’re still available. If you’re considering one, run the numbers through a financial calculator to compare lifetime loan costs.
4. Comparing Loan Terms
Interest rates are just one of multiple points of comparison you should consider when evaluating loan offers. Others include the length of the loan and its annual percentage rate (APR).
APR is a little different than interest. It accounts for interest charges along with all other applicable charges and fees. APR creates a much more accurate picture of the loan’s true cost. When it comes to loan repayment terms, shorter periods are generally better. However, longer terms lead to lower monthly payments. This can deliver helpful financial flexibility, potentially making the higher overall costs worth it.
3. Check The Fine Print
Lenders sometimes bury additional fees in the fine print. These can include origination fees, application fees, and other charges.
Unfortunately, some unscrupulous lenders pull the old bait-and-switch on credit-challenged borrowers. They know this consumer segment has limited options. Thus, they draw borrowers in by promoting rock-bottom interest rates and appealing terms. But there’s a catch: all kinds of hidden costs are tacked on in the fine print. Fortunately, there’s also an easy solution: read the fine print carefully and avoid lenders that exploit this deceptive practice.