What to Look for in an Auto Loan Contract Before Signing

Shopping for a new car is exciting, but don't let that excitement lead you into a bad auto loan contract. Before signing, make sure you understand the terms of the contract and what you'll be paying over the life of the loan.

Loan Terms

The loan terms are the backbone of the contract. Make sure to review the loan amount, interest rate, monthly payment, and the length of the loan. Ensure that the loan amount matches the price of the car and that you can afford the monthly payment. The length of the loan can also affect the total cost of the loan, so make sure it aligns with your financial goals.

Interest Rates

Interest rates play a huge role in the cost of the car over time. Look for an interest rate that matches or beats the market average. Additionally, double-check whether the interest rate is fixed or variable. A fixed interest rate means it stays the same over the life of the loan, while a variable interest rate can change, which may increase your monthly payment or total cost of the loan.

Fees and Penalties

Don't forget to review fees and penalties. Some loans have hidden fees or penalties for paying off the loan early. Read the contract carefully and ask your lender to explain any terms that you don't understand. You can also compare the fees and penalties from different lenders to find the best deal.