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FARMERS BRANCH, Texas,
March 20, 2013 /PRNewswire-USNewswire/ -- According to a survey from the Texas Credit Union League (League), 13.5 percent of Texans plan to purchase a car this year and 12.2 percent will buy a house. With the majority indicating they will not use savings to make their big purchases, the demand for affordable loans will likely rise.
While the current market offers favorable rates, MyFICO.com says the best options are usually only available to borrowers with "tier one" credit, which generally requires a credit score ranging from 760 to 850. Without research and planning, consumers outside of tier one may find themselves paying more than necessary for their loans.
Consumers planning to make a big purchase may want to ask:
What is the average interest rate for auto loans in the U.S.?
Is zero-percent financing always the best option?
Will I pay more in financing costs for a used auto?
How can I improve my credit score to take advantage of more favorable financing rates?
Courtney Moran, executive director of the Texas Credit Union Foundation, many consumers make the mistake of focusing solely on the interest rate of a loan.
"People need to consider the overall costs of the loan," she explains. "Many times there is great variance in the cost of ancillary products like gap insurance and extended warranties. And sometimes dealers will aggressively sell things that people don't necessarily need or want."
Moran also cautions homebuyers to ask questions regarding closing costs, discount points, and what prepaid items are required (such as prepaid insurance).
"Often individuals focus on the monthly payment. Even though a monthly payment may be affordable, it's important to consider overall costs. Fixating on monthly payments is another common mistake which results in paying much more over the life of the loan."