5 Things to Know About Car Loans Before You Apply
Are you thinking of getting a new set of wheels?
Most people need a car loan to buy a car. If you are among the few people who have the cash to buy your dream car, good for you!
But if you don’t have enough cash needed to buy a car, a car loan is a great option.
Before you sign anything, grab the car and drive off to the sunset, here are a few important things you need to know:
1. Understand loan eligibility
Before you apply for a car loan, understand the kind of loan you can qualify for.
Lenders also need to check your credit history so you’ll also need to prepare some financial documents.
If you have a low credit score, you can still avail of a car loan. However, you’ll face higher interest rate charges than a person with a good score.
2. Check the interest rates
The interest rate is the additional money you’ll be paying on top of the purchase price, so double-check the cost before signing anything.
The lower the interest rate, the better.
3. Consider all costs
Interest is just one charge.
Car loans come with other fees and charges that include but aren’t limited to a loan establishment fee, warranty fees, insurance fees (mandatory or optional), and break fees charged in case you repay your loan earlier. Car loans also come with penalty fees if you miss a payment.
To ensure you don’t miss any other costs applicable to your car loan, read the contract to the letter. Ask about all applicable fees and charges applicable over the entire repayment period. Doing this is important for avoiding any surprises.
4. Consider the term of the loan
Most borrowers are tempted to extend their loan terms to enjoy smaller repayments over longer time periods. If this option is available to you, think of the total cost implication of extending the term of the loan before you actually do it.
You are bound to pay more over time when you lengthen the repayment period. Understanding the repercussions of longer repayment terms is important before making a final decision.
At QuickLoans, we explain the terms of contracts before issuing loans. As a borrower, you should get a disclosure statement with all the total costs applicable to the loan, repayment terms, interest chargeable, and other applicable fees.
As a borrower, it is important you read the contract thoroughly and ask what all the fees and charges would be over the full repayment period, in a single (total) dollar amount. This will help you budget and know where you stand.
5. Finance affordable loans only!
If you consider everything above, you should be able to know if a loan is affordable or not. A disclosure statement will let you know exactly what you are required to pay on a monthly basis. Ensure the car loan you select offers affordable monthly repayments.
While high monthly repayments can translate to a lower overall borrowing cost, you risk suffering serious financial problems.
Besides facing late fees, you also risk damaging your credit score/rating if you can’t keep up with high repayments.
You should take a car loan you can repay monthly with ease i.e., one that allows you to take care of your recurrent expenses and still have money left over for saving and unexpected costs/emergencies.
Are you ready to apply for a car loan? Simply click the Apply Now button and enter your details.
This is not legal advice.
Ash is a professional content writer with extensive experience in business development in the financial services. Ash has founded businesses from the age of 19, including franchising ventures, and working alongside some of the largest retailers in the world.