Unique Ways To Spend Less On Auto Loans

April 6, 2009

There are countless tips to help you save on auto loans. You can shop around, work to improve your credit, or use the internet to sniff out the best deals. You are probably familiar with these and other more common suggestions, but what if you want to do something more?

Here are a few tips that will help you save on your next auto loan that you may not have heard before.

Home Equity Can Help

You may not have thought of using your home equity to help with your auto loans, but it can. Using your home equity can actually help to decrease the interest that you pay when you get an auto loan.

Home equity loans are often a great way to secure a lower interest rate because of their connection to your home. With the value of your home behind them, banks fell freer to lower interest rates. There may be another bonus. Interest on home equity loans is often tax deductible which is a nice additional benefit.

The one drawback of this loan is that it is tied into your house. You must be able to keep up with your payments, or your house could end up on the line. You do not want to risk losing your house just so you can get your car.

In the same vein, you could go for a home equity line of credit. This will present you with a low interest rate, at least in the beginning. The interest rate may fluctuate later and increase your monthly payments. This option is usually best for short term loans because there is less time for the rate to fluctuate and a shorter period for you to pay for it if it does.

Use An Independent Lender

Doing your auto financing through an independent lender can save you a bundle. Although it is easy to finance your car through the dealership, this is not always the smartest financial move. Your credit rating could be another liability when doing your financing through a dealership, more so than with an independent lender.

If you do go through a dealership then they may end up making more from your auto loan then they do from selling you your car. Now that is something to think about.

When you are shopping for a car, many dealers will prompt you to supply the type of monthly payment that you can afford. Based on this figure, they may increase the interest rate to fit the amount that you can afford.

By then bringing the loan with this increased interest rate to a lender, they can benefit by receiving a commission on the loan. They could receive the extra money that the bank would make on the loan just because they have had you agree to an interest rate that is more than what the bank would charge on its own. You could lose a great deal of money in this scenario which is one more reason why an independent lender could be the way to go.

Think Twice About Zero Interest Loans

Zero interest loans can sound like a great deal, but think again. They might not be at all what you expected. You could be relinquishing a considerable rebate when you agree to a zero interest loan. In the end, you could be paying more on your zero interest loan than you would on a traditional loan.

People are always looking for new ways to save money on the essentials. Auto loans can be expensive if you don’t know how to get the best deal so you need to learn all you can. These additional tips give you extra insight into the art of saving money on auto loans.