Facts About Signing an Auto Loan
When you sign an auto loan contract, you are stating that you agree to and will abide by all terms of the contract. Bank contracts differ by bank, but most have the same policies in place. There is no canceling a bank contract. The bank is in legal rights to repossess your vehicle and take you to court to get any additional money owed if you do not pay as agreed.
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Interest Rate
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The bank contract lists the rate that you agreed to, and the total amount financed. Subprime lending sometimes charges high fees for finance. When you sign your loan, you agree to pay the interest rate charged to you based on the amount of money you're borrowing. You are also signing in agreement to the monthly term discussed.
Amount Financed and Payment
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This part of the contract breaks down your amount financed. By signing the loan contract, you are agreeing that you owe the amount stated. This area breaks down the cost you are paying for the vehicle, any applicable taxes and any aftermarket warranties or items and applicable taxes on each. You also are agreeing to the rebates and incentives listed in the price break-down, and your trade amount, including any pay-off amount. Read this part of the contract entirely to make sure that all discounts and terms are understood or are as previously discussed.
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Stipulations
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The bank can void your contract if you do not provide the stipulations it requires. Stipulations are pieces of information that the bank requires before extending a loan. For example, you might need to provide documentation of any of the following information: Pay stubs listing your year-to-date income, references, proof of a utility bill in your name at your address, documentation of any additional income and prior year tax information. If you are unable to provide this information and have already signed your contract, the bank does not have to extend you a loan. This happens often at dealerships---you may sign a contract and leave in your new car only to find out the bank has changed its mind based on the lack of information or incorrect information provided. You sign the loan agreeing to the banks terms, the bank does not sign the contract that promises to extend you a loan.
Insurance Coverage
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Your contract lists your required insurance coverage during the time that you have a loan and you are agreeing to have this coverage. This portion of the contract usually states that full-coverage insurance is required with the lender listed as the loss payee. Deductible limitations are provided, as well---some banks do not allow your insurance policy to include a deductible over $500, although you can choose it to be less. Contracts also state that the bank will add its own insurance policy to the vehicle if it is not notified that you have a policy in policy. This usually happens when you switch insurance companies or renew your policy and the bank does not receive the new coverage information.
Nonpayment Reprocussions
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Read your contract entirely to find out the bank's non-payment repercussions. This portion always lists repossession. By signing the contract, you are agreeing and acknowledging that the bank can take its vehicle back if you are a certain amount of days late on your payment.
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References
- Photo Credit bank image by Pefkos from Fotolia.com
