Car loans can involve a lot of information which can make it an overwhelming process, especially if you’re doing it without the help of a finance specialist.
There are some common mistakes you should avoid when applying for a car loan to help save you time and money.
Not doing your research
If you’re considering a car loan, you need to do your research first. There are many car loans available. Each may offer different rates and terms and you need to do your research to see what is available and what type of car loan is best suited to your needs, and budget.
Compare various car loans on offer, look into the terms and rates to understand what may be an option for you. Check which criteria is best suited to your needs, as not all loans are the same, and different lenders may have different criteria.
Work out what type of car you want and research car reviews. Consider its primary use, and how much it will be used each week. Keep in mind, it can be better to find the right car loan first, and this may determine what kind of car you end up getting.
Not knowing what you can afford
Before looking at loans, understand your financial situation and what you can afford to pay for a car loan to avoid getting into financial trouble.
You want to be in a stable financial position so that even if unplanned expenses come up, you are still able to make your loan repayments. Consider if you have any debt to pay off or large upcoming purchases that may affect how much you can afford.
Negotiate the best rates possible for your loan, as well as the purchase price of the car. Make a large down payment if you’re able to, as this will reduce your repayments and help you save on interest. As well as the down payment and regular loan repayments, you should also consider the ongoing and maintenance costs that come with owning a car.
A car loan calculator is a helpful tool to give you a guide on the repayments of a car loan. It can help you determine what falls within your budget so you can determine if the repayments will be achievable for you to keep up with.
Also, checking the comparison rate will often give you a more accurate idea of what you will pay, as this includes the fees and charges that come with the loan, not just the loan amount and interest rate.
Before shopping for a car loan, look at your budget and work out what you can realistically afford. This will help you avoid getting talked into a loan that is outside your budget.
Not carefully reading terms of the loan
Reading the fine print of your car loan is crucial. While you may want to get your new car as quickly as possible, don’t rush into signing the papers for your loan without carefully reading through the terms and conditions.
Make sure you understand all fees involved with your loan, whether that includes an exit fee or early payment fees. Ideally, you want a car loan that offers flexibility to make bigger payments when possible or pay off the entire loan early if you’re in a position to do so, as this can help you save money on the loan.
Ask questions before signing your car loan contract to get all the information you need. If there is anything you’re unsure about, get clarification.
Reviewing everything carefully is important to make sure the loan is right for your needs and budget.
Not considering your options
There are numerous options for vehicle finance. The way you use your car can impact what type of finance may be best for you.
If the car will be primarily used for work purposes, you may want to look into a novated lease. This involves an agreement between you, your employer and your lender, in which your employer is responsible for the repayments, with this cost taken from your pre-tax salary.
Talk with your finance specialist about your needs, and they can provide advice on what type of financing may be best suited to you.
Choosing a long loan term
While a longer loan term can be appealing as it may lower your car loan repayment amounts, you can end up paying more. The longer the loan term, the more you’ll pay in interest for your car loan, which can add hundreds to your overall loan cost.
Choose the shortest loan term you can afford, to save as much money as possible. If you can budget to pay higher repayments, it will be worth it in the long-term as you’ll pay off your loan sooner, and pay less overall.
Just because your repayments are affordable doesn’t mean you’re getting the best deal, so make sure to look at the bigger picture when considering your car loan.
If you’re considering a car loan, speak to a 360 Finance Specialist to get expert advice.