What Are The Risks of GMAC Car Loans

GMAC car loans are provided directly through your GM dealer in order to finance your GM vehicle. The General Motors Acceptance Corporation started solely as an auto financing group, but it has grown into an international financial services corporation. The company's core competency is still providing auto loans for GM purchasers, and they are usually a streamlined option to finance your purchase. However, many purchasers fall into the feeling that these loans represent a discount on the sticker price and are excellent deals. With any car loan, there are negative sides as well as risks. 

Unfavorable Loan Terms

When you finance through a dealer, you may get competitive interest rates. Typically the dealer offers these rates to entice individuals to purchase the vehicle. The rates may be subsidized by the manufacture; this is the case with GM, which offers interest rate incentives to purchase their vehicles.

Despite this low interest rates, there are usually catches with loans straight from the dealer. These catches come in the small print. You will often see high penalties if you decide to pay off the loan early. Furthermore, you may face disincentives to refinance or modify the loan in any way. While it is easy to concentrate on the short-term, thinking about these long-term consequences is important when you have a large loan like an auto loan.

Inability to Shop Around

Many purchasers make the mistake of not shopping around for auto loans. You do not have to use the dealer's financing as the only option. Most banks provide auto loans. You can also research direct lenders to find more competitive loan terms. When you decide to purchase the loan, do not allow yourself to get stuck thinking you have to use the dealer's option.

In addition, many car buyers make the mistake of shopping for the car before shopping for the loan. In order to ensure you can ultimately afford your loan, it is a good idea to shop for the loan first. Determine what your true budget is based on your trade-in and monthly available income. A good rule of thumb is to ensure your monthly car payment plus your rent (or mortgage) is not more than half of your monthly salary. If it is, you may be over-financing yourself and setting yourself up for default.  

Repossession

The biggest risk with any car loan is the chance of repossession in the case of default. GMAC will hold the title to your car until you have entirely paid off your loan. If you miss too many payments, you will be served with a notice of default. Once this occurs, your vehicle may be seized at any time without prior notice to you. Lenders typically will try to catch you off guard with a seizure, meaning it could occur while you are at work or at school.

To protect yourself from default, seek a loan and a car you can afford. If your financial situation changes, and you cannot afford the loan, be proactive to settle the debt or reduce your monthly fees. The lender would rather work with you to reduce your fees than lose the loan value all together. 

 

 


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