Don't Fall For These Cheap Personal Loan Traps.

Personal loans come in many shapes and sizes, so choosing the right one for your next car loan can be a tricky proposition

. As the world recovers from the global financial crisis, more and more lenders are re-entering the market and you are no longer limited to applying at your local bank branch. Private lenders, finance companies and car dealerships are all back in the game ready to offer you the 'deal of the century'.

But don't be too hasty in accepting the first offer that comes your way. Lenders are experts at putting bells and whistles on their loan products so you need to be knowledgeable before making a decision. Be prepared to do a little bit of home work and you could save hundreds or maybe thousands of dollars, depending upon how much you borrow.

Here are some traps you may not have thought of.

The interest rate does not tell you the full story. A lender may be advertising a car loan at 14% for example, and a credit union might be offering a car loan at 14.5%. Which one is the cheapest? Well, you won't know the answer to that question until you ask a few questions yourself. Find out whether there is any ongoing monthly account keeping fee attached to the loan. In some cases a lender will add a monthly fee of, say $10. This will increase the effective interest rate you pay and in the above example with a loan of $20,000, the first lender is effectively charging 15.01%!

Many lenders will want to sell you add-on products as you go through the signing up process on your new car loan. A typical example is to sell you insurance products including income protection that guarantee to maintain your loan repayments during periods of incapacity or even where you lose your job. Don't be easily seduced by these products because they can easily cost you an extra $50 a month or more, in some cases depending upon your age and the amount borrowed. In many cases, workers compensation payments or other insurance products you already have will give you adequate protection, so don't sign up on the spot, do your homework first.

As well as selling insurance products, it is becoming an increasingly common practice for lenders to offer you extra credit cards to help you with emergency purchases. Although it might be tempting to accept the offer of easy credit, you are far better off avoiding this temptation and limiting yourself to a loan that covers your exact expenses and nothing more.

Just by taking note of these simple facts can save you hundreds of dollars over the term of normal car loans. By not falling into these traps you may even be able to save enough money to buy some of the accessories you didn't think you could afford in the first place!

Choose your car loan as carefully as you choose your car, be wary of the above facts, and you are well on your way to saving yourself a lot of money

by: Todd Bertshinger

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