When it comes to auto loans, there are a lot of myths and misconceptions circulating around. It’s important to know the truth about auto loans before signing on the dotted line so that you don’t end up paying more than you bargained for. In this blog post, we’ll discuss the top 9 lies you’ve heard about auto loans and why you need to stop believing them.
1) Auto loans aren’t worth it
This is one of the biggest myths about auto loans. In fact, getting an auto loan can be a great way to finance your next car purchase, allowing you to purchase a more expensive vehicle than you would otherwise be able to afford. Auto loans also come with a variety of benefits, such as allowing you to build credit and offering fixed payments and low interest rates. So don’t believe the lie that auto loans aren’t worth it – they definitely are!
2) Only people with bad credit get auto loans
Many people believe that only those with bad credit can get an auto loan, and this isn’t true. While it is true that having a bad credit score can make it harder to qualify for a loan, it doesn’t mean that you won’t be able to get one. There are lenders who specialize in helping those with less-than-perfect credit get the financing they need. Additionally, some dealerships have special programs to help people with bad credit get the car they want. So if you have bad credit, don’t give up on the idea of getting a loan – it may still be possible.
3) All auto loans are the same
This is a common misconception that simply isn’t true. While there are similarities between different types of auto loans, there are also significant differences. The main distinction is between secured and unsecured loans. Secured loans require collateral, such as the car itself, to back up the loan, while unsecured loans do not. Additionally, the terms of an auto loan will vary depending on the lender, the type of vehicle being financed, and the borrower’s credit score. Before you choose an auto loan, make sure you compare several different lenders and understand all the details of the loan you are considering. Don’t assume that all auto loans are the same!
4) Car dealerships are the only place to get an auto loan
This is a common misconception that many people believe. In fact, you can get an auto loan from a variety of sources, including banks, credit unions, and even online lenders. There are many advantages to shopping around for the best auto loan, such as the ability to compare rates, terms, and loan options from different lenders. Additionally, some lenders may offer special discounts or promotions that can help you save even more money. So don’t be fooled into thinking car dealerships are your only option for an auto loan – shop around to find the best deal for you!
5) You need a down payment to get an auto loan
This is one of the most widely believed myths about auto loans. While it’s true that a down payment can help lower your monthly payments and improve your chances of approval, it’s not necessarily a requirement.
In fact, some auto loan lenders don’t require a down payment at all. This is because they understand that not everyone has the funds available to make a large down payment. As such, many lenders will offer auto loans without a down payment.
The bottom line is that you don’t need a down payment to get an auto loan. While it can help, there are plenty of lenders who will approve you without one.
6) The longer the loan, the lower the payments
Many people mistakenly believe that the longer an auto loan is, the lower the payments will be. While this may be true in some cases, it is not always the case. Taking out a longer loan often means paying more in total interest over time, as well as higher monthly payments due to interest accruing over the life of the loan. Additionally, if you are attempting to finance a car with bad credit, taking out a longer loan can lead to higher interest rates and even being denied financing. Therefore, it is important to look at all the factors before deciding to take out a longer auto loan.
7) Refinancing an auto loan is always a bad idea
Many people believe that refinancing an auto loan is always a bad idea. This could not be further from the truth. In fact, there are many instances where refinancing your auto loan can be beneficial. Refinancing can help you to get a lower interest rate and monthly payments, as well as a longer loan term.
When considering refinancing an auto loan, it’s important to compare the new terms and conditions to your current loan. If you can get a better deal with a new lender, then it may be worth considering refinancing. It’s also important to keep in mind that while refinancing can help you save money in the long run, there are also some upfront costs associated with refinancing your loan. These costs can include processing fees, closing costs, and other associated fees.
Before you decide to refinance your auto loan, make sure to weigh all of the pros and cons. If you’re able to secure a better deal and reduce your overall costs, then it may be worth considering refinancing. Just make sure to carefully consider all of the costs associated with the process before making any decisions.
8) All auto loans have pre-payment penalties
This is a common misconception about auto loans. Pre-payment penalties, which require you to pay extra for paying your loan off ahead of time, are not universal. Many lenders offer auto loans without pre-payment penalties, so be sure to shop around. If you do find a lender with a pre-payment penalty, read the fine print to make sure that the penalty isn’t excessive and make sure it’s worth it for you to take on the penalty. Before signing anything, make sure to check if there are any hidden fees associated with pre-paying. In many cases, it can be more beneficial to pay off your auto loan early even with a pre-payment penalty.
9) Gap insurance is a waste of money
This is one of the most widely believed lies about auto loans. Gap insurance is actually an incredibly important form of coverage that can protect you if you are in an accident and your car is totaled or stolen. It is especially important if you have a loan with a large down payment, as gap insurance can cover the difference between the amount you owe and the amount your car was worth when it was totaled or stolen.
Gap insurance is not always necessary, but it’s definitely worth considering if you have a large down payment and/or are financing an expensive vehicle. The cost of gap insurance may seem like an unnecessary expense, but if you’re in an accident and your car is totaled, it could save you thousands of dollars in out-of-pocket costs. It’s important to weigh the cost of gap insurance against the risk of being stuck paying off a loan for a car that you no longer have.