In the course of life, you are bound to face three crucial questions – marriage, owning a house, and owning a car. Despite how emotional these decisions might be, you should be very objective to find the best way to buy your dream car without breaking the bank.
In this piece, you will learn seven things that you need to prepare before applying for a car loan.
Most people are eager to buy a car and take it for a cruise that they overlook the important decision-making process involved with buying a car. Pause for a minute and read these seven things that will make it easy for you to buy a car through a loan.
Determine Your Budget
Most people get comfortable with the monthly payments on a car that they overlook the cost they will have to pay in the long term. When you walk into a car dealership without a good idea of the price of a car, the dealership will most likely ask you what your monthly budget is. This question is relevant because it will determine the amount of time you will spend paying for the car and the quality of the car you can be able to afford.
Therefore, you need to determine the total cost of buying a car, including the monthly payments and interests over the long term. This calculation is important as it will help you make good choices while you are in the market looking for the right car.
1. Confirm You Credit Reports and Score
It is always wise for you to go through your credit score and reports before you apply for a car loan. You will most likely not qualify for higher rates if you have poor credit scores. In such a situation, you should focus on repairing your credit scores before applying for a car loan. A good credit score will not only ensure that you get better rates but will also ensure that you are considered for some of the dealership promotions.
2. Search for a Better Deal
Most people think that car financing is only available at car dealerships. However, this is not true. You can get car loans Australia in banks, online lenders, and credit unions. You will be surprised to learn that these third-party financings are way cheaper than the deals offered by car dealerships, because of dealer mark-ups.
Therefore, it is important for you to shop around. Visit banks to understand the car financing deals that they have. Settle on one that offers the best car financing deal before visiting a dealership.
3. Learn About All the Documentations Needed
To get a car loan, you will have to provide several documents, including proof of income, vehicle information, proof of residence, and proof of insurance. Proof of income is important as it assures the dealership or bank of your ability to pay back the loan.
4. Get All the Necessary Preapprovals Needed for a Car Loan
Once you identify a suitable car loan provider, learn about all their car loan preapproval requirements. Knowing your ability to satisfy all the preapproval needs will ensure that your application process will go through all the way to the end. Get all the preapproval needs so that you can be given the preapproval letter.
5. Find out If You Can Negotiate the Interest Rate With Your Bank
Negotiating for a better rate should be preceded with a good credit score. If you have a good credit score, you should negotiate with your bank for a lower interest rate on your car loan. A lower interest rate translates to a lower EMI, which also translates to a lower amount payable on the car.
6. Learn About the Down Payment of the Car You Wish to Buy on Loan
Most banks offer car loans amounting to 100% ex-showroom cost to its clients. This offer sounds good at first, but it might be costly in the long run. You will have higher EMIs to pay. It is, therefore, important for you to research about the down payment you will have to pay. The higher it is, the lower the overall amount you will pay for the car loan.
7. Find out If Your Bank Charges a Pre-Closure Penalty
Pre-closure of a car loan is a reason to celebrate because it means that you cleared your debt earlier. But the pre-closure penalty might just make it hard for you to enjoy the achievement. Find out whether your bank charges the pre-closure penalty so that you can avoid getting caught off-guard.
About the Author:
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.