0% Auto Loans: Zero Percent Financing Truths and Incentives

January 27, 2012

There are thousands of websites that promise 0% auto loans. But not many people are actually aware of what the loans entail. Here is a quick rundown of what you are paying for exactly in 0% private auto loans.

Higher Monthly Payments

If you have a 0% loan then there are riders that come with the loan. For example, most loan companies will expect you to pay back the car amount in three years or less. That means you have a very high monthly payment that can be difficult to meet. An average monthly payment may be more than other loan payments by as much as $200. You will also incur a higher fee if you do not pay the loan back in the required period of time.

No Discounts or Rebates

This is a very strict rule, but it applies only on 0% interest rate loans. You will not be given any additional dealer discounts, tax rebates and even incentives on the car price due to the loan option you have selected. If you aren’t really sure which loan is cheaper, try to check with online loan calculators that will do the job for you in an instant. They will also tell you exactly how much you are paying more or less as compared to ordinary loans.

Credit Score

Please make sure you read the fine print properly. You will find out that most customers who apply for an auto loan after bankruptcy, will not be approved at all. This is because a good credit score is imperative to be approved for a zero interest loan. A good customer should have a score of at least 750 or more to be eligible for the interest free loans.

Repayment Deals

You may not be able to repay the loans earlier. Most of these loans come with clauses where you are stuck with hefty pre-payment bills when you choose to close your loan earlier. You will also be restricted from buying other cars during the same period of time to make sure you do pay back your loan on time.

Other Eligibility

Customers who have a good credit score will face other problems when they apply for a zero interest loan. You can buy only from a limited number of models of car and your choices are restricted to those cars present at the dealer at that period of time. Another kicker is that if you miss a single payment of the loan installments, you will have to pay the regular payments with interest included in them.

Zero percent financing can be a really good deal if you know exactly what you are getting into. It also works out great if you have a great credit score and if you can make the high monthly payments. But the bottom line is that you should look at all the options that are available to you before you get swayed by the zero percent tag. Read the fine print, use an online calculator to find the financial nitty-gritty down right, and then simply choose the one which make the best financial sense for you.

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