10 Things to Think About before Applying for a Car Loan
Purchasing a car has become a necessity. Cars help people access services and their jobs conveniently. Also, it saves you time. During emergencies, it’s easier to go where you need to be because you have your vehicle.
Purchasing a car is a choice of investment. Buying a car in cash will require you to pull out a huge sum of money from your savings. Instead, take a car loan and save money for a different investment. Your savings are better off in economic tools such as banking and probably earn interest from them.
A car loan could be paid in installments you can afford according to your chosen tenure. You can pay back your car loan in convenient equalized monthly installments (EMIs). With this, you will be able to handle your finances efficiently as you know how much your monthly payment will be.
If you’re considering getting a car loan, there’s a list of things you should consider before applying for a car loan.
1. Know your budget
To avoid your loan becoming a liability, you need to identify your budget range. This way, it is easier to know later what kind of insurance you will get.
Your budget is one way for you to identify what you can afford. Do your research and see the car range prices, and don’t forget to include the possible monthly rate fees. But it doesn’t just end there, also consider the future needs of your vehicle, such as gas, maintenance, insurance, and add-ons.
2. Check your Credit Score
To get a good deal for a car loan is to make sure your credit score is eligible. The higher the credit score, the better chances of reasonable interest you will get. If you have existing loans, it would be better for you to settle them to improve your credit score.
3. Identify if you’re to Buy a New Car or a Pre-Owned Car
You have already identified your budget. At this time, it would be easier to find out what you can afford. Whatever your budget allows, you can help you start identifying choices and the span of car dealers.
4. Do your Research from your Perspective Car
Brands play one of the biggest roles in car prices. Don’t forget the specs, features, the model as well. Cars could be expensive because they’re the latest model or the model you have chosen has better specs than other cars.
Jot down a summary of your prospective cars and compare them.
5. Inquire about Car Loans
Getting multiple quotes for loans may help you get the best terms—usually, the longer the tenure, the higher the interest on your loan amount.
Also, if you wanted to close the loan earlier than your tenure date, you could check the penalty fees. You must apply for a car loan with flexible repayment options. Some lenders charge an excessive amount of penalties. Choose a company that offers flexible repayment options.
6. Prepare your Documents and Apply for Car Loan
You must never forget to prepare essential documents to submit when applying for a loan—also additional information about the car of your choice.
1. Personal Information
Provide official government documents that contain your personal information. Or, provide all your personal information with the supporting IDs you own.
2. Financial Capacity
One of the most important documents to get approved for your loan is to ensure the lender that you’re financially capable of getting the loan. Sometimes, they would ask you to submit your payment stub. Provide that as well, if available.
3. Statement of Account
Statement of accounts is also one way of verifying the worthiness of the borrower. It ensures you pay for all your other responsibilities and verify your personal information.
4. Vehicle Information
Some lender no longer requires the vehicle information you have in mind. However, it is best to come prepared. It will be easier for you and the bank representative to get an estimated rate for your loan.
7. Scrutinize the Fine Print of the Loan Agreement
Read the terms and conditions of the loan agreement carefully and identify if it suits you. Some people find themselves with the wrong loan product just because of skipping this. You wouldn’t want to be in that situation, do you?
It’s best to be equipped with their terms so that if something happens in the future, there’s nothing for you to be shocked for.
8. Check Out the Car you Want and Go for a Test Drive
Once your loan is approved, you’re ready to make the deal and take home your new car. But before you do that, check the car personally and go for a test drive. Researching is never enough until you get your hands on the wheels. Test drive not only gets you to see the features but also, you will be able to know how it feels operating the car on your own.
Test drives are done so that, as a buyer, you will evaluate if the car of your choice will also be the car of your comfort.
9. Refrain from Buying Extended Warranty
Some buyers go as far as extending warranties, thinking that it may cover any future mechanical failures. However, in some dealerships, that is not the case. Some dealerships offer extensive warranties with minimal benefits.
10. Get it Checked with the Mechanic
You can get a good deal out of a pre-owned car. However, this reasonable price can bring you problems in the future. Before you finalize your deal, make sure you can bring a mechanic to check the car with you. Have it thoroughly inspected by your mechanic to see what state the car is in.
With your car evaluated, it will be easier to identify if it is worth the purchase or if it will give you nightmares in the future. Usually, pre-owned cars are negotiable. With the mechanic’s assessment, it will be easier to haggle the price with the dealer.
Get Financially Smart
Be wise in handling your finances by planning ahead of your future goal. Make your investment right by researching thoroughly and selecting the right plans. With this, you can minimize financial disaster in the future.