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 Benefits of auto GAP insurance
  Getting an auto loan 101
By the EchoBay Loans Expert
 Benefits of auto GAP insurance
Dear EchoBay Expert: When I was purchasing my Audi today at the dealer the finance manager insisted I buy auto GAP insurance for my new car loan. I didn't take it and I'm wondering if I made a mistake. Thank you.

Dear Loyal Reader: First, auto GAP insurance is only available when you buy your car. You can either purchase it from the dealer or you can purchase it when you buy your new insurance policy. But it must be done at one of these times, it cannot be added later.

Many people mistakenly believe that their car insurance will payoff their auto loans if they are in an accident or their car is stolen. But your insurance will only pay for the value of your car. If there is a difference between your car's value and the loan amount, you will be responsible for the difference. This is where auto GAP insurance comes into play.

This insurance will pay the difference if you should find yourself in that situation. Auto GAP insurance is very inexpensive and only needs to be kept until you owe less on your car than it is worth. Because of the cost and the possible benefit if something happens to your car, it is a good idea to take out this coverage.

But do be sure to check with your insurance provider before you purchase this coverage from the dealer. The dealer typically has a mark-up and you can get it for even less directly from your insurance provider.

 Getting an auto loan 101
Dear EchoBay Expert: I've never applied for an auto loan so I don't know what to expect during the process. What are the basics I need to know about getting a car loan?

Dear Loyal Reader: The first thing you'll discover are there are a variety of lenders for you to choose from. Whether you want to work with a local bank, a credit union, an online lender or the dealership you're buying a car from will be the first decision you'll need to make. Generally, as a rule, online lenders tend to have the best available interest rates and the quickest approval times.

Exactly what interest rate you'll be charged will be determined by what shape your credit is in. If you have great credit, you can expect a low interest rate. If your credit has some scars, you'll probably wind up paying a bit more for your auto loan. If you're thinking of seeing a dealer about a zero-interest financing offer, make sure that you understand not all borrowers qualify for this type of financing, and your credit will have to be absolutely spotless in order to qualify.

Unless arranging your financing online, be prepared to put money down on the vehicle. The down payment required will vary, but consumers usually put at least 5 percent down when making a vehicle purchase. The length of your car loan will depend on how long you want to be in debt and how much money you can afford to pay each month.

Vehicle terms generally range from 36 to 72 months (although shorter and longer terms are available). Try sticking with a 36-month auto loan term in order to pay off your vehicle quickly. This will also help you to avoid becoming "upside-down" on your auto loan, where you owe more on the car than what you can sell it for.

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