Used Auto Loans - Do not Let a Smart Choice Turn Sour

by : Tom Jenks

Used auto loans should not be dealt with lightly. Consider this- you've already made a smart money choice by deciding to buy a used vehicle instead of a new one. So why let all that go to waste by choosing a financing option that could end up costing you?

Used But Not Old

Many people still have a mindset regarding used cars- they believe that these are old vehicles that are almost falling apart. However, the truth is that, many used cars on the market are either hardly used or are in excellent condition. This can really work in your favor, because the resale value of a car is usually a lot less than its original price. With a little groundwork, you can find a great used car and it will cost you a lot less than a new one.

What makes this proposition even better is the fact that you can finance the purchase of your used car with used auto loans. So far so good, right? But this is where you need to be extra careful. Before you opt for any kind of financing, it really pays to shop around, compare quotes and if possible, negotiate with your lender to get the best terms possible.

The Low-Down On Loans

There are two main kinds of used auto loans- Secured and Unsecured. Secured loans require you to post some kind of security against your loan- this could be your house, a piece of property, or even the car itself. The security must be of equal or greater value than the amount for the car. The advantage of this kind of loan is that, it often means lower interest rates for you.

Unsecured loans don't require any kind of security. These are ideal for people who don't own their house or don't have anything to post as collateral. Which ever loan option you choose, you need to keep certain points in mind. First of all, the terms for used auto loans will vary from lender to lender. This means, you should read the fine print to find out exactly what you are getting. Some lenders may have hidden charges or extra fees they may not mention outright.

Lenders are usually open to negotiating certain aspects of your loan as well. If you would like a different kind of payment schedule for instance, sit down with your lender and discuss it. This means, you should enter into discussions with a clear understanding of what loans are all about. Read up on basic financing terminology and be absolutely clear about what kind of conditions will work best for you.

Finding a good used car is only part of the equation. If you sign up for the first loan you come across, the money saved on buying a used car could go in paying for a bad loan. Familiarize yourself with what used auto loans are about before you sign anything.