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Bank Loan Versus Dealer Financing
Q. What if I do not have enough cash to buy my new car, even after
my trade-in?
A. Then you need financing. Banks, credit unions, loan companies,
and car dealers are all
potential funding sources. Interest rates will vary among these options.
Shop around for
the best deal by comparing the various loan terms and annual percentage
rates (APRs).
The APR is the actual interest you will have to pay on the unpaid balance
of the loan, and
may depend partially on your credit history. For further information on
comparing terms
and APRs, see the "Consumer Credit".
Q. What must the creditor tell me?
A. The creditor (the person or institution to whom you will owe
money) must inform
consumers of:
1. the annual percentage rate (this must be conspicuous,
for example printed in red or in
much larger type than the rest of the document);
2. how the creditor sets the finance charge;
3. the balance on which the creditor computes the finance
charge;
4. the dollar amount of the finance charge (this also
must be conspicuous;)
5. the amount to be financed (the loan);
6. the total dollar amount that will be paid (loan plus
finance charge); and
7. the number, amount, and due dates of payments.
Making Sure a Creditor Treats You Right
The Truth in Lending Act (TILA) protects consumers. Congress passed
it in 1969 to
ensure that consumers get enough facts to enable them to make an informed
decision
about financing. It applies to consumers who seek credit for money,
property, or services
for personal, family, or household purposes. (TILA does not cover
business, commercial
and agricultural credit. It applies to financing for personal, family
or household uses.)
Creditors, either people or organizations, who regularly extend consumer
credit that is
payable in more than four installments are subject to the Act, as
are creditors who require
(or may require) a finance charge. |
Q. What if the creditor does not follow the rules?
A. Creditors who disobey the rules may have to pay you any actual
damages that you have
sustained. For example, if you paid more than you should have, you may
be able to
recover the excess. They also may have to pay your court costs and lawyers'
fees, as well
as a fine to the state. In a class action lawsuit with many complainants,
the penalty paid to
the government could be much larger.
Q. What is the maximum APR that I have to pay?
A. That depends on the laws of the state in which you live or
where the deal occurs. States
that regulate "usury" allow different maximum APRs, depending
on their laws.
Remember, an APR is negotiable, though a creditor may not exceed a statutory
upper
limit.
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Advertising/Sales Practices
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The New Car Contract
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