How Auto Insurance Impacts Auto Loans

numbers How Auto Insurance Impacts Auto Loans  Image courtesy of Dottie Mae http://www.flickr.com/photos/dottiemae/5188013034/

Most lenders are going to require that any vehicle loan they sign off on comes with an insurance policy, usually one with full coverage to boot.  This means that when you are looking at different loans from different lenders, you need to consider the other side of the overall equation: the cost of insuring that vehicle.   Auto insurance is an absolute must not only for lenders, but also for different states and potentially even cities.  Many states and cities even have laws requiring that insurers operating in their regions report a lapse or downgrade of an insurance policy on a vehicle with an active loan to both the lender and local authorities, an act that could result in the loss of registration or even more.

This leaves us with a burning question: How can you stay insured on a budget?

There are many answers to that question and many tips and tricks along the way.  Here are some of the best pieces of advice to keeping your auto loan rates down:

Suggestion #1: Shop Online

It used to be that motorists looking to buy insurance would have to drive to the office or office of a local insurer or insurers and discuss rates in person.  With time ticking and few options to choose from, the result would almost uniformly be a sub-par rate compared to the best offerings in the country.  Fortunately, the advent of the Internet has made it possible to shop an entire country worth of insurance companies with a single application, just like it is possible to shop a country full of lenders with a single auto loan application!  Better rates and more options are only a few keystrokes and clicks away.

Suggestion #2: Work on Your Credit

Your insurance rates are influenced by credit score, a fact that few people truly understand.  Thankfully, your credit score is something that can easily be improved in just a few short months.  If you are saving for a vehicle now, also be sure to work on your credit score.  The Internet is literally filled with credit advice and great resources to help you improve your overall credit score.  The impact of improving your credit score can be quite dramatic and very immediate when it comes to insurance rates, and thankfully it also impacts auto loan rates!  This double-whammy makes improving your credit score a top priority for both insuring a vehicle as well as getting a loan for a vehicle.

Suggestion #3: Pay it All at Once

Most insurance companies offer significant discounts for paying an entire 3- or 6-month period in advance.  There are often lesser discounts for paying a 6 month block in 4 payments, and these savings may be anywhere from a few percent to 10-15% depending on the insurance agency.  Saving money by paying in advance is a great way to get a deal above and beyond what you may already be offered.

Suggestion #4: Know What You’re Buying

It pays to know exactly what you are getting into when you are learning about insurance.  Many insurance companies offer better deductibles than you may actually require for a variety of reasons, but knowing exactly what you need may place a very significant role in saving a good deal of money.  You may not need glass coverage or a very low comprehensive deductible, so be sure to learn local laws and regulations before you start shopping for insurance or you may be comparing rates for insurance that vastly exceeds your needs and obligations.

Suggestion #5: Consider Bundling and Other Deals

If you already have other forms of insurance, such as home insurance, you may be able to realize additional savings by shopping for those as well as your auto insurance at the same time.  Additionally, some companies offer their employees discount rates through vendors so be sure to consult your human resource office before shopping for any type of insurance to see if there are any discount rates available to you.

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