Recently, I was at a car dealership for my scheduled quarterly maintenance and this time sat in the sales waiting area. A couple came in and started speaking with one of the sales people.

I thought it was to purchase a car, but I heard the gentleman state that even though the vehicle had been purchased over 12-months ago, a full year of payments have not been made yet. This usually happens when you use the 2-month grace period at the beginning of a loan.

Money is probably tight during this time, so any reprieve is welcomed.

However, the grace period is not so graceful as it just delays the inevitable- making monthly payments and all the while interest is still accruing.  You should plan to pay off the debt early instead of opting to delay.

By doing so, you decrease the total amount of interest you pay over the life of the loan, thereby decreasing your total outlay.  Having a plan before you make any major purchase will allow you to be in control and not be at the mercy of the lender.

When you are armed with a plan, you do not have to take whatever deal is offered to you. One of the most important steps in your repayment plan is to make sure your credit is in order.

If your score is below prime, you will not have the upper hand during the negotiation period. Low scores equal high rates. Secondly, secure your loan before the actual purchase. Obtaining your own financing for a car puts you in the driver’s seat.

When I purchased my car a few years ago, the dealership offered a few financing options which included a zero-percent interest rate.

As I read through the paperwork, I noticed that the total purchase price changed with the zero-percent offer. That cost went up by $6,000 from the amount shown with a numbered rate.  

I, of course, refused the dealership’s options because my loan was already secured which helped my decision making.

If I had taken the zero-percent deal, interest still would have been paid.  It just would have been paid up front in the purchase price instead of over the life of the loan.

Since I already had financing and had put in place a plan to pay the loan off early, I was able to walk away from the deal that would cost more in the long run.

Making large purchases does not have to be so daunting, but you should proceed with care.

Budget and plan for large purchases so you can approach lenders with confidence and not from a place of desperation. You should always shop around for the best deal and do not buy more than you can really afford.

Put aside funds to have a decent down payment to reduce the overall loan amount which can also lower your monthly payment and most importantly, prepare a repayment strategy before you even start looking to purchase.

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