Carrying out intensive research when buying a car will save you money, get rid of the stress that comes with it and ultimately help you get the best deal in the market.
Not only researching about the car but also the loan provider. Because one wrong mistake will leave you in debt and we don’t want that.
Here are tips to help you avoid making mistakes while looking for the best loan deals.
1. Check Your Credit
Nowadays most lending facilities have access to their customer’s credit reports. Your credit report acts as a guide to lending facilities to help them determine how risky you are as a borrower.
From the reports they can tell if you pay your loans on time. Additionally, they can tell if you are a chronic defaulter and have been blacklisted by CRB. Take a moment to find out how you have been rated.
Go over your credit reports keenly and find out if there are errors. Confirm that you have no pending debts that have been paid but not updated. Such errors can make your credit rating drop. Contact a credit agency and correct the errors
2. Find Out Your Credit Score
Your credit report and your credit score are closely related. However, the credit score may not reflect on your credit report. Therefore you may have to visit other agencies that offer credit score reports and find out what yours is.
Some of the factors that affect your credit score include: how often you delay your loan payment, how much money you owe your debtors and the number of ongoing loans you currently have.
Rectifying errors in your credit report can improve your credit score just as much as paying off pending debts. Additionally, a good credit score will help you obtain better loan rates.
3. Shop For Car Loans
Just as you are determined to get the best car deals with the lowest possible prices, you should also put as much effort when it comes to car loans. Do not just settle for the financing options that the car dealership is offering, shop around and compare rates.
Contact as many local banks, microfinance institutions and even direct lenders during your search of a lender. Ask about their charges, rates and even hidden charges.
Make notes about each lender and compare them. You will notice a difference in quotations and the terms that they offer. Take a moment to think through each offer before settling on a car loan.
4.Get Pre-Approved
Armed with all your car loan research and data, you can now approach your lender of choice and get pre-approved. A pre-approval means that the lender will offer you the money under the terms and conditions you both agreed upon even without the car.
However, the money will only be availed once you know which car you want to buy.
With a pre-approved loan, you will be able to estimate the total cost of the loan, the interest rate, the length of repayment and monthly instalments. You will also have the time to move things around in your budget to fit in the loan.
5. Put Down a Good Amount in Down Payment
The initial amount you pay for a car is called the down payment. Normally, it is usually ten or twenty per cent of the car price. The down payment has two significant advantages.
One, a larger down payment lowers the loan amount thus you pay less in terms of interest to the lender. Two, it lowers the loan risk to the bank since whether or not you pay back the loan, they will have this deposit and repossess the car.
It might be hard to come up with a considerable amount of money as a deposit but in the long run, you will save a lot of money on loan interest.
6.Borrow Very Little
As mentioned above, making a bigger down payment lowers the loan you have to pay back. Additionally, borrowing less also lowers the amount of interest accrued and the length of time you have to pay it back.
One of the best ways to ensure you do not take out a big loan is to purchase a cheaper car. If you are just starting your first job and you are looking for convenience, you can settle for a functional budget car. This will not only decrease the loan amount you need but also the amount you spend on maintenance.
7. Choose a Short Term Loan Option
It may be tempting to pay back a loan for a longer duration of time. However, the longer the time, the more interest you pay. Of course, paying back the loan for a longer period means that the monthly instalments are less but you stand to lose more money in the long run.
Therefore just as it makes sense to borrow less, it is also advisable to pay it back in the shortest amount of time possible.
8. Allow the Car Dealer to Compete Your Loan
With your pre-approved loan from an outside lender, you stand a chance to bargain for better terms at your dealership. You already have a baseline for the terms offered by the lender and they are well within your abilities to pay.
With this in mind, you can tell your dealer what the terms and conditions are and allow them to compete for your loan. You will be surprised that the dealer might offer even better terms thus saving you some money. Since a pre-approved loan does not mean you have to take it, if the dealer offers you a better dealer, you can take that one instead.
9. Ask About Manufacturer Offers
If you are planning to buy a brand new car, ask your dealer if they have any manufacturer offers or any kind of offers for a car you are interested in.
Nowadays, carmakers try to promote the sale of some of their vehicles with special financing deals. These deals can go a long way in saving you tonnes of money running into thousands.
10. Pay The Loan on Time
Once your loan is approved, ensure you make timely monthly payments. Avoid paying penalties for late-payments and ensure your credit report stays clean. Even a single late payment has the potential to throw you off your overall creditworthiness.
If your lender allows it, try to not only pay on time but also pay more than you own. That way, you will be reducing the loan amount significantly and lowering the duration of loan repayment.
Summary
Getting the best car loan deal is just as important as the type of car you choose to buy. Do not just fall into any random financing option. Instead, take time to research, compare options before settling for a financing option. With the tips shared above, you should be able to make an informed decision when choosing an asset finance partner.