Considerations Before Getting a Car Loan

Online Loans

May 25, 2020

‘Sign your life away’ is often the feeling borrowers have when getting a car loan. It’s important to make sure that your arrangement suits you and your family.

OnlineLoans goes over a few considerations that borrowers might have:

Top Takeaways:
  • Different vehicles suit different car loans
  • Viewing your credit score won’t affect it
  • Fees can be flexible to match your circumstances
  • Higher credit scores can often attract lower interest rates
  • Lending institutions want to help their clients
Before Applying for a Car Loan
Know the car you want

This should include the make, model and whether it’s a new or a used vehicle.

Take some time to check out online reviews and go for a test drive. Does the car suit a family? Will the interior look good after pets and kids give it a “thorough test”? What kind of fuel economy will you get?

Finding these answers (and more) will help you to get a rough idea of how much you should expect to pay for the car and determine the loan amount.

Work out your budget

No one likes dreading the day a loan repayment is due and you don’t have to.

Prior to car loan repayments, work out your budget by understanding your total income amount and then identifying your expenses each month. It may take a couple of pay cycles to get an idea, but it can really help.

Find out your credit rating

It’s easy and free to find out your credit rating through a reporting agency like Equifax. Fees can apply when you need your report instantly or need multiple credit reports in a short amount of time.

You’ll be able to see your credit score and also check for any errors or inaccuracies in your credit history. If there are, you have the right to dispute them.

Many people fear checking their credit report as they think scores might be affected. This is not the case – simply viewing your credit report won’t affect it. Much like physically picking up your kids’ school reports won’t alter the data (as much as they may try!).

Use a car loan calculator

Getting a ballpark idea on the figures with a loan calculator is super simple. You’ll have an instant result once you enter your information and be able to play around with some hypotheticals. It’ll enable you to understand how much your repayments are likely to be.

Get a quote

Even more accurate than a car loan calculator is a car loan quote. A quote takes your specific circumstances into account where often a loan calculator is only a rough guide without knowing things like your credit score, employment and residential situation.

Early repayment fees

The word ‘fees’ always strikes fear in the hearts of car loan applicants, but there are many car loans that don’t have early repayment fees. Make sure to read through all the details and weigh up the pros and cons.

Sometimes, borrowers find a vehicle they like, get a car loan and make the purchase before selling their current vehicle. Other than storing, registering and maintaining two cars, it can be difficult. If they sell their old vehicle and use the money to knock down the car loan amount owing on the new vehicle, fees can apply.

OnlineLoans has options for complicated situations.

Loan Term

It’s a good idea to figure out how long you require to pay back your loan. Generally, the most popular loan term is around 60 months or 5 years.

Interest Rate

Car loan interest rates can appear all over the place. Some dealers even advertise “zero %” interest rates – but there’s a catch. These rates only apply to certain vehicles and certain credit profiles so any blemish on your credit report can often knock you out. Get better interest rates by polishing up your credit report before applying for a car loan.

Avoid ‘interest rate tunnel vision’ when looking at car loan options. Often, there are other fees and fine print to note. For example, a slightly higher interest might offer more vehicle choices, fewer fees and a longer car loan term.

Your lender

Sometimes borrowers fear finance companies and lending institutions – there’s no need. 

Lenders are well aware that people’s circumstances change and can sometimes offer solutions without affecting their credit score or chances of future credit approval.

If you ever worry (even the slightest) about making a loan repayment, call your lender – they are there to help and want to offer their clients good customer service.

The next step

After taking your circumstances and needs into consideration, you’ll be ready to start applying for a car loan.

Get started with an OnlineLoans quick quote for a clear range of options tailored to your circumstances.

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