I know how exciting it can be when buying that dream car of yours. However, if you are unable to cough out the lump sum needed to buy that dream but it is auto financing you are going in for, then make sure you are doing the right thing.
For your information, Wells Fargo Auto financing is currently at about 11,000 dealerships nationwide. Therefore, do well to ask the dealership if Wells Fargo Auto Financing is available to you.
LIST OF THINGS TO CONSIDER BEFORE FINANCING YOUR VEHICLE
A fair understanding of these things will help you in deciding to finance your car and also enable you to understand what you loan entails.
One of the most important things to consider before financing your car or vehicle is the interest rate. Applicant must first confirm the annual percentage rate (APR) of his/her loan. You must find out if your loan has a fixed rate i.e. the monthly payments and interest rates remain the same or it is an adjustable rate i.e. your monthly payments and rates can change.
Note that your interest rates and monthly payments will depend on your credit score, your income, and vehicle you are going in for. Interest rates on new vehicles are normally lower than rates for used vehicles.
TOTAL AMOUNT FINANCED
Ensure that the amount on your loan documents is the same as what you asked for. Also consider local taxes when determining the total dollar amount to be financed.
Do check your county and state website for more information on local taxes.
MONTHLY PAYMENT AMOUNT
Another important consideration to make before financing is the monthly payment amount. You must make sure that your monthly payments can be maintained within your monthly budget without feeling the impact on your finances that much.
Look out for potential penalties that comes with financing you vehicle. Find out if you can pay your loan off early without paying a penalty.
If that is not possible, then find out how much extra you would have to pay.
There may be some hidden charges you may not be aware of at the initial stages. Hence it’s best to find out if there are any hidden charges that comes with your auto loan.
Most auto loans have some credit insurance or other fees included in them. You may want to consider paying for such services only if you need them.
DURATION OF YOUR LOAN
The last but definitely not the least on the things to consider before financing is the term length of your loan. The longer the duration of your loan, the higher the cost of loan. Auto loans usually last between 36 months to 72 months.
You might be tempted to go in for a longer term loan in order to pay lower monthly payment amount. However, that will only mean that your loan could cost more over the life of the loan.
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FREQUENTLY ASKED QUESTIONS
Some frequently asked questions by customers are;
HOW IS INTEREST CALCULATED ON MY AUTO LOAN
Interest on your auto loan is calculated using simple interest where your interest accrues daily. As you pay off your loan, the daily interest charge will also decrease.
In order to calculate the daily interest charge, you first have to convert the interest rate percentage to a decimal. This can be done by dividing the interest rate by 100. Now multiply that number by your principal balance, then divide by the number of days in a year which will give you the daily interest charge.
Example; if your loan has an interest rate of 8% and a $10,000 principal balance. First convert the interest rate into decimal; 8/100 = 0.8. Now calculate the daily interest charge;
0.8*$10,000/365 = $2.20 daily interest
DOES A LATE PAYMENT AFFECT MY CREDIT?
Yes. A late payment can affect your credit to some extent. That is if your payment is 30 or more days late, then it may shop on your credit report as a late payment.
Note that the extent to which a late payment affects your credit score can depend on several things like how frequently you make late payments, how many days past due your payment is and how recently you made late payments.
Best thing to do is to examine your credit report regularly to enable you have an idea as to where you stand. You can apply for a copy of your credit report from www.annualcreditreport.com or from any of the nationwide consumer reporting agencies; Innovis, Equifax, Experian, and TransUnion