Even with public transportation and rideshare services such as Uber on the rise, the need to own a vehicle is still as strong as ever. Statistics show that 91% of US households own at least one car, and it’s no secret that the majority of us finance our cars via an auto loan. Studies show that 32% percent of cars offered for a trade in this year were underwater (the money owed on the loan was far more than the car’s value).
So, are we all simply stuck with the dealership’s high interest rates and fees, is there no way to eliminate the trend in underwater loans, or is there a way for us to take control of our loans and find a more favorable situation? As it turns out, you can do something to steer clear of this financial trap, and it’s a whole lot easier than you might think. The answer is a good credit union.
Are Dealerships Really to Blame?
At the end of the day, the dealer is no different than you and I. They are doing their job, and part of that is offering the loans that their company tells them to. It certainly seems as though their loans are built to work against the buyer, though.
What might look like a great incentive with money saving opportunities can actually be a major pitfall. Offering small to no down payments, a plethora of often unnecessary add-ons for the vehicle, and incredibly long loan terms all greatly increase the amount of money you end up borrowing (along with high interest rates). Not to mention that your car can lose 20% of its value the second you drive it off the lot, often times immediately putting your loan underwater in the first place.
So where can you find a more reasonable auto loan without falling prey to the loan sharks out there?
Join A Credit Union
Finding a good credit union is easy, and they can offer you a whole lot more than another account for your income. In general, their rates are often far lower than those you’ll find in banks or finance companies, and members pay little to no fees associated the application and documentations of their loans. They also offer a more personal experience than larger corporate institutions do, making the entire process smoother and friendlier.
While every union has different rules and regulations for memberships, it shouldn’t be hard to find the right one for you. With a quick internet search, comparing the best credit unions for auto loans is a breeze, and the best way to find savings when financing your new car.
Even if you have poor credit, these unions are known for being lenient with their members and helping them boost their credit scores through the loans they offer. Whereas a dealer may see a low score and immediately boost the amount of interest, a union is more likely to be on your side with lower rates. Plus, you can join and sign the papers the same day.
Being approved for a loan before heading into the dealership offers another great advantage, you know exactly how much car you can buy. When you walk in to buy your car, you’ll know exactly what you can afford and if there are any add-ons you can finance as well. Even better, you know you’ve already settled on a great interest rate, loan term, and skipped the additional fees.
Avoiding the pitfalls of a terrible loan is easier than most think. If you play your cards right, when the time to purchase comes, you can have the peace of mind knowing that your auto loan won’t go underwater.