If you are like most people, you will probably need some form of external financing to afford the car you want.
This is where car loans come in.
While getting a car loan is easy, it is not always straightforward. This means that you must understand the intricacies involved and do your due diligence.
Here are seven common mistakes that you should avoid.
1. Ignoring Your Credit Score
Your credit score is crucial to your loan application.
A high credit score gives you some leeway to negotiate interest rates and loan terms with lenders. This is not so with low ratings.
With a low score, car loan lenders are likely to reject your loan application. Those that agree to advance you the loan will attach higher interest rates.
When you begin thinking about taking an auto loan, take a look at your credit score. If it’s below average, take some time to improve it before applying for an auto loan.
You can learn more about credit scoring here.
2. Not Calculating How Much Car You Can Afford
A common mistake people make is only looking at the monthly installments on a car loan. While this is important, you should look at the total costs in their entirety.
You want a car loan that agrees with your income, budget, and lifestyle, not one that will become strenuous over the months.
3. Failing to Negotiate Interest Rates
Nothing is fixed in business. For this reason, do not take the first offer you get without negotiating the stated amount. A high credit score gives you more wiggle room in negotiation.
Aside from this, your down payment and principal amount also influence the chargeable interest. If you are ignorant of these factors, you are more likely to be overcharged by unscrupulous dealers.
4. Going For Longer-Term Loans
Taking a longer-term loan gives you smaller repayment installments, but is pricier in the long run.
Instead of going this route, try and get a car whose loan you can pay off as quickly as possible.
However, as you do this, ensure that the EMI’s you settle on are manageable. If they are too high for you, you run the risk of defaulting and having the car repossessed. This could also dent your credit rating.
5. Not Paying Attention to Loan Terms
Repaying your loan at the earliest time possible is advantageous to you as a borrower. However, some lenders will penalize you if you clear your loan earlier than is stipulated in your contract.
As you shop for an auto loan lender, ensure to ask about early repayment and if it affects you in any way.
In as much as possible, try and identify Brisbane car loans with no prepayment charges. This way, you will be at liberty to make lump sum payments whenever possible, without accruing extra fees for it.
6. Ignoring online Lenders
There are many credible car loan lenders online today. Do not ignore these as you shop around for a lender.
Online lenders have fewer operating costs than financiers that run brick and mortar businesses. They, in turn, can pass down the benefit by offering cheaper loans.
The benefits do not end there. Most of these lenders allow you to complete all the formalities online. This makes the process much easier and faster than if you have to meet a bank manager in person.
7. Taking the First Deal
You have to shop around before accepting an offer.
Get online, ask around, and call a few lenders to inquire about what they offer. Different lenders will offer varying long terms to borrowers, and a little shopping around can help you identify the best offers.
Give yourself ample time to go through this process and avoid getting excited in the first stages of your research. This could save you a significant amount of money [t1] on your auto loan.
Shopping For a Car?
If you are shopping for car financing, you might find yourself overwhelmed by all the dos and don’ts involved.
At Auto Loans Group, we understand this all too well and work hard to help our clients find the best deals in the market.
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.