Many car owners are left in a maze of confusion about their car loan schemes after some time, especially when problems arise. You can, however, separate the real deal from fiction by consulting your lending institution.
Here are also five common misconceptions that might lead you away from the answers that you need:
1. Your car is the collateral for title loans
This is not entirely true. Some money centers only require the deeds or titles of car as collateral. A title loan in Salt Lake City, for instance, would feature flexible payment schemes, giving you the money you need while you get to keep your car. It is only in certain circumstances where loan companies keep your vehicle along with the title during the period of the loan.
2. Loan payments will increase with higher vehicle prices
Even when car prices change, this is not reflected on your monthly loan payments. This is because car loans can be extended for a longer period, which provides car owners with cheaper monthly payments.
3. Your driving history is the only factor that can determine the insurance rate
A money lender would only consider your driving record as one of the many factors to lend you money. Other factors include your age, the car’s brand, the type of your car—whether SUV, ATV, etc.—and the theft rate in your area. More often than not, urban areas have higher theft rates than rural areas.
4. A bad credit history cannot get you a car loan
Although there are loan firms that do not approve a loan application for customers with bad credit score or bankruptcy history, other companies tend to be more lenient, and even help you build your credit with their loan system. It is still, however, important to keep a clean and a good credit history by keeping track of your credits and paying them on time.
5. My car insurance can pay for my loan.
When your car is totaled, your insurer will pay you the actual value of your car, subtracting your deductible. You are still accountable to your lending institution, paying any outstanding amount on the loan.
By separating facts from fiction, you can maximize the use of your money, insurance schemes and loan payments. You can also plan which loan credits to settle first, and when to pay for your credits. Make sure to verify hearsay stories about car loans, which are often misleading.