Are the best car loans the ones that offer you great interest rates or are there some other factors too that you should consider? What factors shall you consider when comparing car loans online? Buying and financing a car of your own is not an easy decision.
When you are comparing car loans online, there are a variety of fundamental things that you need to do before making a final decision. Continue reading further to find out how to get the best deals for you.
1. Compare Your Options by Looking at the Annual Percentage Rate
You should bear in mind when shopping for car loans or any other loan, that the advertised interest rate on the website is quite different from the annual percentage rate. This is because the interest rates that you are charged for borrowing money are devoid of the fees that is charges for the given loan.
On the other hand, the APR is not just the annual cost of borrowing; it also includes the fees charged for the loan. Just like the interest, AAPR is also expressed in a percentage but do not confuse it with the former. Since the APR also incorporates other fees, it gives in depth knowledge about the deal you are entering into with the lender.
Therefore, it is a better and fair measure for comparing loans from different online websites. This does not mean that you do not compare the interest rates at all because your monthly instalments will be based upon the interest rate.
2. Compare the Early Payment Penalties
Make sure that you have a clear understanding of the penalties imposed. You should get clarity whether the lender will subject penalties if you make early payments. Notice how the interest is calculated. If the loan calculations are done with simple interest, then the quicker you pay the borrowed amount the lesser amount you pay as the interest. Mostly, online car loan companies calculate the interest like but there are some charge you on a pre-computed basis.
3. Consider Short Term Loans
Despite the fact that several online companies are offering long term loans more frequently more often, you will end up more interest in the end. If you are looking best rates, then keeps the loan term as short as you can, keeping your monthly budget in mind. If the loan term is shortened, then the amount of monthly instalments would definitely rise but the interest will be smaller.
4. Compare the Loan Protection Options
Deliberate carefully upon the loan protection offers like PPI and GAP. In the UK the payment protection insurance (PPI) is designed to insure the payment of the credit loans just in case the borrower becomes disabled, dies or loses the job. While the GAP insurance serves as an addition to the collision policy. This insurance policy will pay for your car if the outstanding balance is more than your car’s worth.