Choosing the Right Loan
Once you have quotes on fast auto loans, you will need to decide which offer is right for you. Here are the things you should look at when comparing fast auto loans.
- APR or annual percentage rate. The APR reflects interest rates plus any fees and charges to give a more accurate picture of the total annual cost of borrowing. The APR will be expressed as a percentage of the loan's principal. You want to select fast auto loans with the lowest APR possible. Federal legislation requires lenders to calculate their APR the same way and to display it in bold print on the customer loan agreement. When comparing fast auto loans, the APR is a much more telling way to evaluate loans than interest rates alone because it can show that low-interest fast auto loans are not always the cheapest overall.
- Up-front expenses. Fast auto loans usually come with several fees and charges that you will need to pay up-front. These charges might include things like application and origination fees. You will need to add these fees up to compare the up-front expenses of different fast auto loans.
- Loan's total cost. The total cost of fast auto loans includes all of the monthly payments you will make in addition to any charges and fees. This is a more valid way to compare fast auto loans than the monthly payment figure because it includes fees, charges, and your interest expenses over time. Comparing the total cost of fast auto loans will help you minimize your interest expense. For example, a $15,000 loan at 6.5% amortized over 72 months will have a lower monthly payment than a similar loan with a similar rate amortized over 36 months. However, the total cost of the 72-month loan is greater because you pay considerably more in interest. Experts usually recommend avoiding fast auto loans with excessively long terms for this reason.
- Prepayment terms. If you choose to pay off your loan early, you will want to know what the prepayment terms and penalties of the loan are. Some fast auto loans limit how many extra payments you can make per year. Other fast auto loans assess hefty prepayment penalties if you pay the loan off prematurely. This kind of information will be important if you ever refinance your loan, so make sure you know the details before applying. If you have any questions, please visit our auto loan FAQ page.
