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Asset or Burden? 6 Things About Auto Loans You Didn’t Know

Automobiles are necessary for social and business transportation, but once you sign up for a loan, you have an added burden. Besides paying for gas and maintenance, you must make each monthly loan payment on time. Here are six things about auto loans you didn’t know.

 Zero Percent Loans

Everyone wants free financing, right? The New York Times reported that only 10% of the applicants qualify for zero percent loans (i.e. only those with great credit scores) and they only work for new car models.

What Constitutes Bad Credit?

Car LoanThis is a trick question because it may be different for automobile versus home loans. It also varies by each car manufacturer. Typically, a credit score below 540 to 580 is considered to be bad.

Everyone Qualifies

Marketing the fact that everyone qualifies for a loan is very attractive to those with bad credit. But, there is a catch. The interest rates for those with sub-prime credit might make it difficult to repay the loan.

Finance Reserve

What happens when you fill out that credit form and the dealer runs a check? By using software from places like NCC Direct, Inc. the dealer has the power to see all of the bank offers for your credit situation. Typically, before the dealer quotes the rate to you, they will add on 1% to 4% as their “Finance Reserve.” Some states cap this Finance Reserve, so check out the law to save you some cash. So you may be better off getting a loan from somewhere other than the dealer.

Additional Services

As you discuss the auto loan, the dealer may run down additional service quickly, such as extended warranties and additional insurance. Do you really need these extra fees? You should do your research and avoid paying for what you don’t need.


One of the nightmare burdens of car loans is waking up to go to work and your car has been repossessed. Car owners need to read the fine print of their loans. Technically, after one missed payment, you are in default and your car can be repossessed. Most dealers will call you and give you 30 days before contacting the credit bureau.

Car loans are pretty much a necessity for most people. Do your research and get the loan that best fits your credit characteristics. Avoid the burden and turn your car into an asset by finding the perfect loan for you.