Going Green While Banking How to Evaluate Credit Protection Plans

Auto Loans: Don't Kick Yourself for Paying Too Much

Use these tips to help you save time and money when it comes to shopping for an auto loan:

1. Review your credit report long before you intend to apply for a loan. A credit report is a summary of your financial reliability – for the most part, your history of paying debts and other bills – as compiled by a company called a credit bureau.

2. Shop for a loan before you visit a dealership or bid for a car over the Internet. Contact your bank and several other local lenders. Ask about the loans they offer – the number of months for which you can borrow, the interest rates being offered, whether there are penalties if you pay the loan off early, and so on. Ask about other options for financing the car.

3. Be careful figuring out how much to borrow and for how long. Of course, the dollar amount of your loan largely will be determined by the sale price of the vehicle minus your down payment, any rebates and the value of any trade-in. But there are other costs that you should consider when deciding how much of a car you can afford and how much of a loan you need. Those costs include auto insurance, sales taxes, annual property taxes on the car (if any), and options you may be inclined to buy, such as an extended warranty. Also remember that every item you add to your loan instead of paying up-front will add to the total cost of the loan because you will be paying interest on the amount financed.

4. Know what you are signing and speak up if you think there's a problem. A variety of laws provide consumer protections in the context of auto loans. Among them: the federal Truth in Lending Act, which requires lenders to disclose to borrowers the terms of a loan (including the Annual Percentage Rate and the total cost of the loan), and federal and state laws that prohibit unfair or deceptive business practices. However, you have a responsibility for protecting yourself, too.