Car Loans
Other than the initial acquisition of a car, the maintenance of your credit score should…
Other than the initial acquisition of a car, the maintenance of your credit score should be one of the highest priorities in purchasing a vehicle. A car dealership will not be on board with you getting a loan outside of the dealership and bringing the money in to purchase your vehicle, but in the end it isn’t about what the dealership wants it is about you.
Getting car loans from a financial institution is going to help you keep your credit report positive. For example, if you get a loan for 10 thousand you can purchase your new car outright and pay your lump sum of monthly payments back to the financial institution instead of being hooked by different fees for purchase at the dealership.
Agencies involved in car finance will not be happy with you if you get a loan elsewhere because they make commission off of every loan they start. Most financial institution lenders don’t make commission from the loans they perform so they are more interested in satisfied and repeat customers.
A customer is basically consolidating their costs into one payment plan by going to a financial institution first. Car finance is a tricky business with many different kinds of additives to what should be a cut and dry purchase. Paying off your principal faster can reduce your interest rates and this can be especially helpful in the case of your loan payments. Your car loans will diminish faster if you pay more towards them quickly.
Your car finance professional should tell you whether your interest is simple interest or compound. If it is compound interest then paying off your principal will help reduce this. If your loan is simple interest then paying off your principal will make no difference to how much you are paying in interest every month. A simple interest payment will be the same until you complete the payment of the loan.
If you are paying off a compound interest loan and you want to pay more on the principal, then make sure you denote this with a short letter or on the payment itself that you are paying towards the principal. A simple “Principal Only” will suffice usually. Some institutions require additional marking on the check. An extra payment can sometimes take off years to your payments of a loan. This is another great way of improving your credit score as you acquire your new car.
