Awareness - A Sure Way to Avoid Pitfalls When Getting a Car Loan

By Robert Worley

When shopping for a car and your financial strength is limited you should consider getting a car loan. This loan will most probably be a secured loan as opposed to an unsecured loan. In this case the car you are buying will be used as security for the loan. The lender you go to will give you a loan based on the current value of the car at that particular time you are purchasing it. The loan value will almost certainly be 70% to 80% more of the retained price of the car. This is important to know before going for the loan on the vehicle.

The reason for this added value of the loan is because a few years after you drive away with the car, the market value of the car will certainly have deteriorated to what is known as depreciation. The lender will therefore strive to ensure that the car loan you get will cover depreciation such that the end result of the loan is almost equal to or less than the actual value of the loan on the car. This knowledge is very important for car shoppers because it can help them avoid getting into an upside down auto loan.

An upside down car loan is the situation where the loan on the car is actually not worth the value of the car. What this basically means is that the balance on the car is of more worth than the value of the loan on car. This is a difficult situation for a borrower to find himself in because car insurance only covers the book value of the car and it would mean using your own cash in the event of accidents to cover the difference. Always be aware, therefore, of all aspects of the loan terms to avoid falling into this situation.

Robert Worley has been entrenched in the car loan industry for numerous years and writes articles to help consumers understand the upsides and drawbacks of getting [http://www.capitalcarloans.com]car loans and bad credit [http://www.capitalcarloans.com/bad-credit-car-loans.html]car loans. Robert is amazing at answering common, everyday questions in his articles and news posts.

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