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 Avoiding a bad used car loan contract
  New car loan vs. used car loan
By the EchoBay Loans Expert
 Avoiding a bad used car loan contract
Dear EchoBay Expert: I'm going to apply for a used car loan at my bank, credit union and with an online lender. What terms and conditions in these car loan contracts should I be looking to avoid?

Dear Loyal Reader: No matter where you choose to get a used car loan, you should read over the loan documents carefully before signing. The first thing you should look for is a prepayment penalty. This can be a set fee or a certain percentage of the loan amount. Regardless, this fee will kick in if you prepay your loan in any way - whether by paying it off or by making an extra payment.

Loan documents are also great places to add extra charges. Be aware of the loan amount and make sure it is the same amount you agreed to pay for the vehicle. Question any differences.

Also, be sure you know what happens to your deposit money if you are not approved for a loan. If it is spelled out in the loan that your money will be forfeited with a denial, you will have no form of recourse once you sign.

Dealers can also sometimes add an extended warranty into the loan. Extended warranties generate a lot of revenue for the dealer and in most cases, do not do a lot to protect you.

A common addition to loans is mandatory credit life insurance. This insurance pays off your loan if you die before the term of your loan ends. This coverage can be somewhat expensive depending on your age. This coverage is not mandatory, although some lenders may try to pass it off as if it is.

Read carefully over any documents before you sign. If something seems out of the norm, question the lender on it. If you're not comfortable with the agreement or can't negotiate some of the above- mentioned terms out of the contract, don't sign.

 New car loan vs. used car loan
Dear EchoBay Expert: With the prices of entry-level new cars starting around $17,000 and the abundance of 1-2 year old higher quality used cars for sale, I need to know if there are any reasons to choose a new car loan over a used car loan?

Dear Loyal Reader: Nothing quite beats the feel and scent of a brand-new car; but is it worth it? We've all heard the reasoning that new cars depreciate the minute you drive them off the lot, but there are other factors to take into consideration when deciding whether to purchase a new car or a used car.

New cars may cost more than their used counterparts, but if you can manage to purchase one while the manufacturer is offering a combination of rebates and low-interest financing, you might just be getting a better deal than if you were to purchase a used version.

Even if the manufacturer or dealership isn't offering any low-interest promotions, new car loan interest rates tend to be lower than used car loan interest rates and you can generally finance them over a longer term. You'll also want to consider maintenance and warranties. If something goes wrong with your used car and the warranty has expired, you're the one who's going to have to pay for the repairs.

There's something to be said for peace of mind, and that's exactly what a vehicle warranty can give you. Some dealerships even offer free oil changes and regular maintenance when you purchase a new car, providing you with additional savings. However, if the payments on the new car you want are too steep, you might want to purchase a less-expense used model, allowing you to drive the car you want at a lower price.

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