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Owning a good car is always the dream of every person. However, when you don’t have enough money the best way is to seek a loan to purchase the one. The good thing is that there are various financial institutions always ready to offer car loans.
However, it is important to choose your car loan wisely to avoid high-interest rates and short repayment periods. Below are 7 tips to consider before applying for that car loan:
1. Know your credit history
One of the first things you should check before you start applying for a car loan is your credit history. Your credit history generally shows your lending history that banks and other lenders will want to use in deciding whether to give you a car loan or not.
Some lenders will be hesitant to give a car loan if you have a poor credit history. Other financiers will agree to lend you – but with higher interest rates. It is therefore important to ensure that you ensure that you clear your loans and develop a savings pattern that will make it easy for banks and other financial institutions to lend you money.
2. Know how much you can afford
Sit down and calculate how much you are able to pay every month. It is good to be realistic when applying for a car loan. Avoid taking a loan that will strain you in the long run in terms of repayment. You can even seek advice from the bank and do calculations with them to determine how much you will be comfortable to repay every month.
3. Limit your applications
There’s always the temptation of making several loan applications to increase your chances of getting a better deal. However, doing so can be counterproductive in the sense that it can affect your credit rating – especially if you are knocked back. It would be good to choose one bank or financial institution and stick with it.
4. Have a budget
Before you walk into any car yard, conduct proper research. For example, decide on the type of car you want as well as the market value for that specific model. Understanding what you want and your repayment amount will help you make a financially sound decision. It will also be difficult for anybody to convince you to purchase a car that’s beyond your means.
5. Understand your options
There are a number of car loan options: The first one is a secured car loan that usually offers lower interest rates but secured to your car. That means the bank can still repossess the car if you are unable to make payments. The other option is the unsecured personal loan. This option gives you the advantage of borrowing more with a higher interest rate.
The last option is adding a car loan to your mortgage via a line of credit or redraw facility. The advantage of this option is that you will get low-interest rates but can take longer to repay – if you aren’t active in reducing the debt.
6. Get your loan approved first
You stand the chance of getting a better car deal after your loan has been approved. It is good to walk into a car yard to do window shopping as your loan is being processed. However, do not fall into the trap of taking the car with upfront payment.
7. Don’t forget about insurance
This is something that most people often tend to ignore. The excitement of getting a new car can easily make you forget about the insurance part. Nonetheless, car insurance is something you can’t do without. In fact, you won’t be able to drive the car out of the yard without it.
Choose car insurance that’s competitive in terms of price. Besides, it should be easy to arrange for the insurance cover as well as make claims. There are some insurance companies that will take you through hell before you receive your claim - in case of an accident.
In general, lack of immediate funds should not be a hindrance for you to own a car. There are many car loans Australia that you can apply and purchase a car of your choice.