Thinking about getting that new ride you’ve been thinking about? Like most car-buyers, you might have spent a lot of time researching and deliberating about which car model or make to purchase without giving much thought or even considering how you’re going to finance it. Many people understand the basics of car maintenance but have no clue what auto finance is all about. That explains why you’re likely to sign a loan in a hurry without taking your time to read the fine print first.
It’s important that you understand what you’re agreeing to before you sign on that document. There are plenty of options available when it comes to car finance which is why you shouldn’t be in a hurry to make any decisions. Here are important things you should know about car finance.
Know your Budget
The first question a car dealer is likely to ask you when you show up at their car lot is, “what budget are you working with?” Of course, there’s a reason as to why they’re asking this question. Focus on the final price tag of the vehicle including the total interest and monthly payments. Stick to what you can afford to pay every month. You don’t want to let the dealer to sell you the highest-priced car in the lot.
Evaluate your Credit Score
When purchasing a car on finance, your credit score is the lifeblood of the loan. It’s what finance providers use to determine how safe you are as a borrower. A poor credit score is going to negatively affect the amount you pay for car finance. Your application can either be rejected or you’ll be offered high interest rates. It’s, therefore, important that you raise your credit score before deciding to take the car finance road.
Check the Interest Rates
Understand that car loan interests vary from one lender to the other. You should take your time to compare finance providers before settling on a loan offer. There are no standard interest rates for car loans. Long-term loans tend to attract higher interest rates, so you might want to choose a shorter one.
How Much to Put Down
Most car finance providers tend to ask for a down payment, which varies from lender to lender. Building a savings account for this initial deposit will save you money in the long run since your interest will be on a smaller loan. In cases where the lender offers no deposit car finance, the car buyer will have to pay back larger monthly deposits. Decide the option that best suits your situation.
Before you sign up for car finance, find out if there are any fees that apply if the loan is repaid before the stipulated time. You can find all this information in the documents provided by the lender. Don’t be in a hurry to sign up. Different finance providers charge different pre-closure rates.
The Cost of Deferred Payments
You’ve probably heard of the “no repayments for 6 months” package. It’s important that you read the fine print and know what you’re agreeing to. Such an offer would mean your loan will accrue interest all the while. Are you willing and ready to pay an extra six months of interest payments on your loan? That’s for you to decide.