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Auto Loans: Demand for TALF Funds May Improve Consumer Access

[Jun 5, 2009.]


In the wake of GM's bankruptcy filing, Reuters reports that demand for funds under the federal government's Term Asset Backed Securities Loan Facility (TALF) has increased by about 8% since May, and approximately 145% since March. The use of the TALF program by banks and consumer lenders should increase funding available for consumer credit including auto loans. Consumers concerned about getting a loan may qualify for auto loans, as GMAC confirmed its viability and indicated that it could make auto loans to customers with credit scores of 620 and below. This proclamation may inspire private lenders to lower credit requirements due to their increasing use of funds available through the TALF program, and in response to GMAC's promise to provide auto loan funding to customers with poor credit.

Auto Loans: Shopping for Your Best Deal

If you're buying a a car, it's best to shop for your car loan first; once you find the car you want, the dealer may press you to use in-house financing, which may or may not be your best deal. Comparing sources and terms for auto loans can give you a leg up on negotiating a deal on your new car. Here are some tips for shopping for auto loans:

  • Plan ahead: Check out car loan rates and terms with several lenders. Try your bank, credit union and check with dealerships. Doing your research within a couple of weeks can reduce the effect of multiple inquiries on your credit scores.

  • Read the fine print: The best annual percentage rate (APR) is an important consideration for your next auto loan, but understanding the terms and conditions of each loan you're considering can help in avoiding misunderstandings or "surprises." Ask potential auto loan lenders any questions you may have. If their answers are evasive or they don't answer at all, it's time to move to your next auto loan prospect.

  • Be realistic: So you've just finished college, have your first "real job", and want a new ride. Before being seduced by that top-of- the line sports car, ask yourself if you can afford it. Are you repaying student loans and other debt? If you've just started a new job, how do you know if it will work out? Will you need to cut corners on necessities in order to make your car payments? Remember to factor in additional costs of registration and auto insurance when budgeting for a new car.

  • Consulting your significant other: If you're in a domestic relationship and share financial responsibilities, it's important to ensure that you're both on the same page with buying a car and taking on an auto loan.

These suggestions are useful for determining how much you can comfortably borrow for a car loan, and how much you can spend for your next auto purchase.


About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

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