If you’re looking to buy a new or used car, then it’s more than likely you’ll need to apply for a loan to help finance it. The process of signing up for car financing can be exhausting, and it requires you to prepare for the application process. The better prepared you are, the higher the chances of you receiving the best financing offers without unnecessary stress.
Applying for car financing is essentially the same as a Personal Loan application that allows you to cover the cost of a new or used car. If you plan on applying for car financing, then keep reading. In this article, we are going to share the top 5 Car Loan tips that will help you prepare for your car financing and buying procedure.
Let’s dive right in!
1. Get your finances in order
It’s extremely important you organise your finances before you buy the car. You don’t want to face any complications with the lender after you have purchased the car. You should know exactly how much money you’re able to borrow and then buy a car accordingly.
Car financing and maintenance are the second biggest expenses in a household after the mortgage. So, it’s better to be sure about its financing before you make any commitments. The loan application can sometimes take longer than you anticipate. It’s better to secure that first before you purchase the car.
2. Make a budget
You need to assess your finances and figure out how much you can realistically afford to pay each month as your car’s repayment. To do this, you should estimate the costs of maintaining the car, including insurance, registration, petrol, maintenance and more, plus all your other regular expenses, like rent, groceries, bills etc.
After determining your budget, you need to start comparing different lenders. Don’t go for the first lender you stumble across. By comparing different lenders, you could save hundreds of dollars in the long run.
3. Run a credit check
Before you can even hope for a great offer, you need to check your credit score and credit history for a realistic expectation. Your credit score is the first thing lenders check when assessing your loan application.
If you have a good credit score, then the chances of you landing a great deal are much higher. However, if your credit score is poor, then the lender may only offer high-interest loans for your car purchase. Great credit history is a result of timely bill payments and no outstanding debt. So, before you file that financing application, make sure you clear out any outstanding bills or cancel any unused credit cards so that it doesn’t become a red flag for your lender.
4. Determine which option will best fit your individual needs
Before you apply for car financing, you need to determine which financing product will suit you best. For that, you need to question the main purpose of buying your car. Are you purchasing the car for a business purpose? Or is your car for personal use? The financing options and their costs vary depending on your answer.
If you’re purchasing the car for personal use, then you’ll have the following financing option depending on your specific situation:
- Personal Loan (secured or unsecured)
- Consumer Car Loan
- Lease or salary packaging
- Home equity loan
If you want to purchase a car for business use, then you may be eligible for the following financing options:
- Mortgage Loan
- Business Finance
- Cash flow lending
- Secure or unsecured loans
5. Do not overdo it with applications
Although you may be tempted to send in your financing application everywhere in order to secure the best deal, it can have a negative impact on your credit score and history. Every time you make an inquiry, it can leave a trail on your credit history whether you proceed with the loan or not.
Credit scores take a hit when too many credit inquiries are made on an account. This will end up costing you in the form of higher rates on your car financing.
If you’re looking to buy a new car, then reach out to us at Cashify and we’ll be able to assist in determining the right loan option for you.
Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.