When you’ve found a car that you love, the temptation to take any car loan for which you are approved can be immense. However, great care needs to be taken when choosing a car loan so that you do not have to pay more than you have to and to avoid conditions that are not always obvious, such as huge fees for paying off the loan ahead of time.
As a car buyer, you should understand that there is a range of options available and it’s definitely worth shopping around and seeking guidance from car finance experts before you commit to any loan arrangement. In fact, before shopping for your car, you should shop for your loan.
Keep these variables in mind when considering various car loans:
1. Term of the loan
It is quite common for the term of a car loan to be between one and five years. However, some loans can have a term of up to seven years.
2. Interest rates
As with other types of loans, there can be great variation in the interest rates imposed on car loans. These significant differences in interest rates are affected by the loan term, the financial institution through which the loan is offered, the total amount of the loan, and whether you are most interested in a fixed or variable interest rate.
3. All fees and charges
Some loans carry a range of fees and charges in addition to the obvious and expected fees and charges. What this means is that you should always pay attention to the fine print published with loan terms and understand all fees, including the establishment and annual fees, as well as fees incurred for paying off a loan early or payment default.
It is stipulated in the conditions of some loans that insurance coverage must be arranged to protect the lender against any missed payments.
5. Repayment schedule
When considering different loans, find out whether you can make your repayments on a weekly or fortnightly basis. Although the repayment frequency may outwardly seem insignificant, by making the right choice, it is possible to save money over the course of the loan.
Ultimately, those seeking a car loan should only ever commit to a loan that they know they are able to repay. While there are some alternative finance options open to those who struggle to get a car loan (such as: borrowing against the equity in a home, using a credit card or personal overdraft to fund the purchase of a vehicle or other short-term finance), these can be expensive and carry high levels of risk.
If the purchase of a car is to be successful, the right car needs to be chosen, a good price must be agreed and the purchase must be affordable. When needing to borrow to fund the purchase of a car, it is absolutely imperative that you appraise and evaluate the features of different loan products and sign up for the one that works best with your circumstances.
When you research your loan options before you even commence the search for a car, the likelihood of finding a loan and car that matches your lifestyle and offers flexibility will be all the greater. In addition, when the time is right to make a deal, you will be prepared and ready to call a beloved car your own much more quickly.