Car Loans

[Deutscher]

Hi, How do they work??
Im in need for 10k... with interest of 8% pa. The loan will be for a minimum of 5.5years. Will I pay the interest for the full 5.5years? or only how long I have the loan? I can pay the loan off in a year but I have to get the loan for 5.5years.

If I paid the 10k off in a year what would I pay in interest?

[greenacc]

Depends on the loan.
Lots of car loans are dodgey as ... when you start the loan for say 10k, they calculate how much you will have to pay all together, which is 10k plus interest. That adds up to be something like 12k over 5 years, or $200 a month. If you pay it off after a year they ream you with fee's n charges so make sure you choose a loan with a small early closure fee.
Or, just buy a cheaper car and save your money , car loans are dead money unless its for work.

[Grennan]

I presume you would pay the 1 years interest, but SOME loans have a fee/penalty for paying it off early.

[Deutscher]

Depends on the loan.
Lots of car loans are dodgey as ... when you start the loan for say 10k, they calculate how much you will have to pay all together, which is 10k plus interest. That adds up to be something like 12k over 5 years, or $200 a month. If you pay it off after a year they ream you with fee's n charges so make sure you choose a loan with a small early closure fee.
Or, just buy a cheaper car and save your money , car loans are dead money unless its for work.

Ah k,
Thanks for that. I guess I've just gotta check out lots of different loans. I thought they kind of all had a one way thing just different costs (interest, early closure fee).

[VrWagz1]

This isnt always the case, but steer clear of finance companys..especially any that the dealer tries to get you to use. Buy your car and tell them you'll pick it up in a week as you have to organise finance. They get that alot and they know the drill, even private sellers know that. Check out your local banks, somtimes they might have a slightly higher rate, but they generally wont reposes your car if you miss 1 payment, generally dont charge exzorbidant early pay out fees, generally they can be easier to talk with after you have loan.

[nemesis_adrasteia]

do your research go for the best deal you can, cos theyre gunna screw you over as much as they can

[levymetal]

what you need to to is ask them how much you will end up paying in total. if it's a 5.5 year loan minimum @ 8% pa, this sounds like a fixed loan. so what they will do is calculate your repayments and the total amount you will pay before they even give you the loan. so it won't matter if you pay it off in 1 year or 5.5 years; you'll still end up paying the same amount.

you also have to watch out, as some places charge you interest pa on the initial loan value (not the balance). what this means is that every year, they'll charge you 8% of 10,000 ($800) interest. even if your balance is only $5, you'll still pay $800 in interest for the year. that is why you need to ask them how much the loan is going to cost you in total before you take it out.

8% interest may seem low, but it's not what it seems. if it sounds too good to be true, it probably is.

[STEALTHY™]

Get a loan with a Credit Union (even better if your already a member)


If you go this path, like i did,

Interest is calculated daily, and added monthly.
No Pay out fee's if you decide to pay the loan out early
Also i had no setup fee's due to being a life member at that bank, not that it will help you lol.


Also keep in mind weather you want to get a personal loan, or a car loan, theres a difference.
And....you will also have to have the car full comp insured, or have other collateral up to 10k.
Because of this, i chose a personal loan, meaning i could use whatever collateral i wanted (as opposed to being made to have the car your buying listed on the loan).

[Pete SS]

Alot of loans have a ballon payment option aswell to make your monthly payments cheaper. This is where you only finance 80% (for example) of your car and then have a lump sum to pay off at the end of your loan. You can then either re-finance that lump sum or trade in your car and add the lump sum to the next cars price. Dealers love this option as it ties you into finance forever.....

[STEALTHY™]

Re that post above, DO NOT get finance through a dealer. it will be something stupid like 18%, and will have all of the fee's i listed above that most banks don't have (which is what you don't want considering you want to pay the loan out early.)