If you’re sick of breaking down on the side of the road or you just want to improve your commute to work with a new car, then it could be time to consider a car loan.
Most first-time car buyers are unable to purchase such a large item without a bit of help from a car loan. These are special loans designed specially to help you purchase a vehicle.
A car is a very expensive purchase that should not be purchased without careful consideration. Do a lot of research before you agree to anything. Car loans can be very competitive so comparing loan options is a great way to save money and reap any additional rewards. Some car loans include deals on car insurance or cover plans for maintenance or wear and tear on tyres.
Check the different interest rates on offer
Interest rates could be floating or flat. Some have a low introductory offer for the first few months and then the amount increases. A small difference in your interest rate could end up costing you a lot less.
The amount that you will qualify to borrow will depend on your credit score. Your credit score is known as the lifeblood of your loan. The higher your score the better deals you will qualify for.
Can you get a car loan with bad credit?
If you have a bad credit score then you will be charged a higher interest rate. A low credit score makes it risky for lenders to lend you money.
Should you apply for a loan from a bank or from the car dealership itself?
Car dealers offer great financial packages and offer one-stop shopping for all your car financing needs. Including deals on insurance. This one-stop shopping allows you to get your vehicle and loan at the same place.
If you apply for a loan from the bank it can be a lot more hassle and they may not lend you enough to purchase the vehicle that you have your eye on.
Help applying for a car loan
Car dealerships have special vehicle finance departments that were specifically designed to handle all your needs. These departments can handle all of the details of the application on your behalf. They also take care of designing an easy to manage payment plan or personal budget and help you select insurance. They know exactly how the process works so your loan application will not be declined. The dealership will ask for your permission to check your credit score and complete all the necessary documents that you need.
Documents you need for a car loan application
You will need to provide a copy of your bank statement, a copy of your ID, proof of your valid address and proof of your income.
Know if you will be subjected to service tax
Some companies charge a service tax fee on a yearly basis while others charge for deferred payments. Some dealerships offer enticing attractive offers such as no payments for 6 months. Make sure that you know the interest rate that you will be charged on your loan. An offer of 0% financing might seem attractive but read the fine print to know exactly what you are being charged and what you are paying for.
Shop around for your ideal car and request quotations from different dealerships. Each car dealership makes use of a different bank so the deals they offer can vary substantially.
Extra fees & charges
Another important factor to look out for is a foreclosure penalty. This is an amount that is charged on the remaining loan amount. You will be charged a foreclosure penalty if you repay your loan early or prior to the end of the loan term.
Most car dealerships insist that the vehicle that you purchase must be covered by car insurance. This is to protect you in the event of an accident and is an important part of purchasing a vehicle. This insurance will cover you in the event that you are in an accident or can’t make payments on your loan.
How much can I afford to spend on a car?
The best way to know how much you can spend on a new vehicle is to get a pre-approved for vehicle finance prior to car shopping. This will give you a basic idea of how much you have to spend. This will also give you more bargaining power and help you seal a better deal.
Applying for vehicle financing is a great way to purchase the car of your dreams. If you want to save even more money, it is a good idea to save to put down a cash deposit on the vehicle. If you already own your own car then you can trade it in to secure a better deal.
Lease to buy options may be better for you
There is more than one way to finance your vehicle. Decide whether you want to purchase your car outright or lease to buy. When you lease to buy you do not need to supply a down payment or trade-in your existing vehicle.
Leasing allows you to purchase a more expensive car for a lot less money! You can trade-in your vehicle to keep up to date with the latest release and all your repairs will be covered.