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For Auto Loans - Part 2

Shop Smart and Understand the Terms
Always assess each car loan based on the total amount of money you'll end up paying back. The cheapest will be the ones with the lowest annual interest rate over the shortest period.

Loans that dazzle you with promises of very low monthly payments over an extended period will nearly always hit you with high-interest rates, meaning you'll end up paying more. If you cannot afford to make higher monthly payments over a shorter period, perhaps you should consider a less expensive vehicle and a smaller loan.

Watch Out for Expensive Add-Ons
Subprime borrowers may be offered loan contracts stuffed with expensive add-ons. Many subprime borrowers are so happy to be approved for a car loan that they fail to see or ignore costly extras, such as after-market services, extended warranties, and even insurance in the lending contract. You shouldn't have to agree to extras that you don't necessarily need just to secure a car loan, even if you do have bad credit. If a lender is not willing to drop these expensive additions, you can always look for another one.

Beware of Yo-Yo Financing
Spot delivery scams, also known as yo-yo financing, are a common pitfall to watch out for when you secure finance through a dealership. You hammer out a deal with the sales rep and leave for home thinking everything's okay. Then, a few days or weeks later, you receive a phone call telling you your application has been turned down for some reason or another after you've already taken delivery of your shiny new vehicle! You're told to head back down to the dealership and pay an additional down payment or agree to a higher interest rate, sometimes with a threat that failure to do this could see your new car taken away from you. Tactics like this are always just a money grab, and you shouldn't entertain them. While laws vary from state to state, either you have completed a transaction, or you have not. If you did buy the car and all your paperwork confirms this, the car dealer must honor the terms of your agreement. If it turns out that your transaction is incomplete, you can return the vehicle to the dealership and get your deposit refunded. You're not liable to pay for the wear and tear you've added to the car by driving it. That's not your problem – it's the dealer's. Do not let anyone bully you or push you into changing a deal.

Beware of 'Buy Here Pay Here' Car Lots
"Buy here pay here dealerships" often target subprime buyers, so be wary of them when looking for a vehicle. These dealerships tend to charge more money than a car is worth, and while buying from one isn't likely to affect your credit score, it won't have a positive effect either. That's because many of these "buy here pay here" dealerships don't even report to the main credit agencies. Even if you make all your payments on time, you won't get any reward for your good work. Whether you have no credit history or your report is speckled with black marks, getting a car loan isn't impossible. You just need to know what to look out for and understand what you can expect from a lender. A car loan can be an opportunity to help put your score in order. It's a major purchase, and making your payments on time will have a positive impact on your score. Just be sure to buy a car that you can afford, shop around for the best possible loan terms, and make your payments on time!

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