Credit Control: Tips For Managing Your Money

Things To Consider When Shopping For Auto Loans

6 May 2021

Levi Bradley

If you are getting ready to buy a new car, you're probably considering your options for securing an auto loan. Since new cars are an infrequent purchase, many people have only minimal experience with securing an auto loan, if any. If you want to be sure that you're getting the best possible outcome in your auto loan search, there are a few things that you should consider. Here's a look at a couple of things you should discuss with each prospective auto loan lender.

Interest Rate

Everyone knows that the interest rate you pay on a loan is one of the most important factors when you choose a loan. However, far too many people believe that the interest rate of your auto loan isn't something you can do anything about.

When you get ready to buy a car, talk with a dealer that offers various different financing options. That way, you can evaluate each loan to find the one with the best interest rate possible. You'll also want to consider talking with the financial institution that holds your bank accounts. Many times, you can get the best interest rate there, unless you're taking advantage of a dealership promotion.

Gap Coverage

No matter who you get your auto loan through, you should also ask about the possibility of gap coverage. Most lenders offer this coverage, though it will increase the cost of your loan. The purpose of gap coverage is to ensure that, if your car is damaged in a total-loss insurance claim, the lender receives the full balance of the loan.

Without gap coverage, you risk a situation where your insurance will pay for the replacement value of the car, but that value may be less than your current auto loan balance. This leaves you owing the remainder of that balance. Gap coverage, on the other hand, will pay for that additional cost.

Loan Life Insurance

Although you probably don't really consider the possibility that you may pass away before your car loan is paid off, there is always a possibility. If you want to be sure that your loved ones aren't left with a significant auto loan balance to pay from the value of your estate in the event of your death, ask your auto loan lender about loan life insurance.

Loan life insurance will automatically cover the balance of the loan in the event of your death. This will eliminate any money owed to the lender. You'll pay a small amount each month as part of your loan payment toward the premium for your loan life insurance, so consider that when you're determining your budget.

For more information about auto loans, contact a local lender, like Premier Financial Credit Union.

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