In 2018, having a car is a necessity for many persons around the world. However, with so many options for cars on the market and methods to obtain a new one, it can be a challenging process.
Car-related decisions are often exciting but stressful; after all, it isn’t a small purchase! If you are still choosing between full-out buying or leasing, then read on to learn the three things you need to keep in mind when getting a car loan.
- There are a few essential questions to take into consideration.
It needs to be said: Just like when taking out a personal loan for business, before taking out a car loan, you must make sure that you understand the responsibility you are taking on and that you have the commitment to stick with the payments through the entirety of the loan.
For this reason, make sure to ask yourself how often you will be driving the car, as most lease contracts have limits on how many miles you can put on the car. Also, ask yourself how long you plan on keeping the car. One of the most attractive elements of leasing a vehicle is that usually, they end after three years, giving you the chance to upgrade to a newer model.
Finally, be reasonable and honest with yourself about how much you can afford to put down in the beginning. The more you put down, the lower your monthly payments will be. And, you may even be able to negotiate further with the lender.
- There are a variety of borrowing options.
Once you have decided that you want to obtain a car loan, it is time to research your borrowing options. There are a few different ways to acquire a car loan, and here are two of the most popular:
In-house financing from a dealership
A convenient option, car dealerships generally offer in-house financing with (potentially) manufacturer-discounted interest rates and extended term financing.
However, while in-house financing with a dealership may be the most appealing in the short term, their low-interest rates often increase after the first year.
Acquiring a car loan from a finance company
The most competitive option, obtaining a car loan from a finance company often means receiving a car loan that is more personalized to your needs. No matter your past or present situation, a finance company is in a better position to get you a loan approval.
Take your time researching the best car loans as there are a lot of competitive rates out there. However, keep in mind that getting a car loan approval through a car finance company will take some time.
- Some scenarios can block you from getting a car loan.
While auto loans are one of the most common loans to get, there are still a few scenarios that may keep you from getting one (or at least one with a reasonable interest rate).
If you have recently had a repossession, this could be problematic. If a lender sees this on your record, then they may be concerned about the chances of you paying a new loan on time. While some may turn you down entirely, others may choose to just demand a more substantial down payment, impose a higher interest rate, or reduce the amount of money they are prepared to lend on the vehicle.
On the other hand, if you don’t have any credit history, this can also create a challenge. If it is your first time applying for a car loan, then you may want to look into a first-time buyers program. Or, you can contemplate asking a co-signer to assist you in procuring the loan.
If you don’t have any previous issues, your car loan application may still get rejected if it is incomplete. This is, obviously, the easiest one to avoid. Take the time to triple-check that you have correctly filled out your application, and that you’ve produced proof of income and other essential information.
Have you ever applied for a car loan? How did you make a decision about which one to take? Let us know in the comments below!
Rob Chaloner is the Founder and Managing Director of Stratton, and is passionate about smarter ways to buy and finance cars. With Stratton, he’s working to help Australian buyers disrupt the traditional car buying, financing and insurance markets through smarter products and online services.