On my way to work a few days ago I was caught in a bit of traffic and was stuck there for over half an hour. As I sat there trying not to worry about how late I am going to be and how many things were waiting for me at work I began to take notice of all the other cars around me. There were cars ahead, behind and beside me, cars as far as the eyes could see. It made me start to think about the many car loans or auto that are being sold in Jamaica. One news website caribbeanbusinessreport.com in an article published in June of this year calls car loan offers the “bread and butter,” of companies. Of course, many local loan organizations are offering sweeteners in the form of complimentary products such auto insurance. Some companies partner with car dealers to offer special prices, all in a bid to woe new business. I want to use this post this month to turn the tables a little and as your General Manager help you sort through the offers and try to understand what would make a good auto loan choice for you the consumer.
I am going to focus on three things that it would be wise to look for when trying to choose a good loan. The three things are loan rates, loan insurance protection and loan fees.
Let’s start with loan rates. There is no doubt that rates are important, in fact this is what will determine how much you repay monthly. There are attractive rates in the market at present and they make one’s head spin with the offerings. However, be sure to find out if the rate being offered is only a promotional rate or a real rate. What do I mean? A promotional rate is one that is offered only for a period and can increase in the future, so find out if your loan rate will change for the worst anytime in the future. We all know what happened in the US only a few short years ago with the subprime mortgage loans that changed literally overnight and had negative ripple effects the world over. Granted, increasing rates for your auto loan probably wouldn’t rattle the world but certainly it would rattle you. So be very careful and ensure that the rates will remain as is during the life of the loan or even better maybe reduced.
The second thing I want to touch on is loan insurance protection. Loan insurance protection protects the loan in the event of death or illness. I want to pause here a minute and share with you something I have among a few persons. Some individuals believe that loan insurance offers protection from delinquency, meaning if a person stops paying the loan because of the insurance the loan will be taken care of. This is not true and not how loan insurance works. Loan insurance only comes into effect if the borrower dies and or is so ill, they are unable to work. However, for you as an individual I am encouraging you to check if the loan you take has insurance coverage. If you should die or fall seriously ill the last thing you want is for your loved ones to be saddled with a loan as well as your care. At the JTA Credit Union we cover loans up to an amount of $6m at no cost to the member. So please find out three things before you take a loan;
1. Is your loan insurance?
2. Does the insurance come at a cost to you?
3. If it comes at a cost, how much will it cost you?
The final point I want to cover is loan fees. Like the interest rate on the loan the fees determine how much the loan cost you the borrower. And even how much you will get to in your hand to spend. So please be sure to ask about the fees attached to your loan. I know it can be a good feeling to get a loan to purchase a car or cover any of your needs for that matter, but please shop around. Don’t rush the process and hurry into any arrangements make sure you ask the right questions so that you can get the loan that’s best for you.