According to a report from the
Consumer Financial Protection Bureau (CFPB), auto loans are the third biggest category of household debt for
Americans, behind mortgages and student loans. Altogether, the country
owes nearly a trillion dollars in auto loan debt.
While auto loan debt may be common, it is not commonly understood. The
CFPB conducted a comprehensive review of over 2,000 complaints related
to vehicle financing, and found that consumers did not generally understand
the terms of their auto loan or realize that they could have received
a better deal.
The consequences of not understanding your auto loan can be substantial.
Most auto loans are lengthy, and run for a term of 48-60 months. While
60 months or five years used to be the standard length of the loan, recently
auto dealers and lenders have started extending these terms. During 2015,
the CFPB found that at least 28% of new vehicles were being financed over
a period of 73 to 84 months.
Despite this, the report stated that only half of consumers report comparison
shopping for an auto loan. The CFPB believes that this is because the
auto loan process can be complicated, with consumers needing to manage
both the financing and other issues like down payments, trade-in value,
and other add-ons that make these loans more complex. As a result, many
shoppers take the first financing offer that they receive, and never realize
that they could have received a lower interest rate or better loan terms
had they shopped around.
After completing its review, the CFPB came up with three pieces of advice
for would-be auto loan borrowers:
Compare financing options before going to the dealership. Look for loans with the lowest interest rates available, and be sure you
can manage the monthly payment.
Check the total cost of the vehicle loan, not just the monthly payment. High interest rates mean that the consumer could end up paying two or
three times what the vehicle is worth after interest is factored in over time.
Ask about hidden or additional costs that may affect your loan. You may need to pay for taxes, interest, and fees that will add to your
Choosing an auto loan that fits your long-term budget is important for
both your credit and your vehicle. Auto loan lenders are notorious for
repossessing vehicles soon after the owner misses a payment. If you cannot
make your monthly payments over the term of your contract, you may find
yourself without a car.
If you are having difficulties with paying your auto loan or other types
of debt, contact the attorneys at Loan Lawyers today. Our experienced
debt defense team can help you create a plan to manage your debt through
refinancing, debt consolidation, or a bankruptcy. To learn more about
your best options, schedule a free consultation at Loan Lawyers today
by calling (888) FIGHT-13 (344-4813).