After buying a home, a car is likely to be one of the biggest purchases that you will make, so it’s important to get it right and make sure you are using the best methods for your circumstances to secure a new vehicle.
Before you take out a car loan, it is crucial to understand your agreement, how your overall credit may affect your loan experience, and how a car loan can alter your credit and overall finances.
To help, we have put together this brief guide on how to secure a car loan and some aspects to be aware of.
Evaluate How Much You Can Afford
Consider your monthly income against the car loan payments, insurance, petrol, and maintenance before signing an agreement.
You should also factor in your regular monthly expenses and any other essential outgoings to determine how much you can afford.
It is easy to forget the additional cost of taxing and insuring a car alongside running costs, so make sure you have done your research before agreeing to any purchases.
Check Your Credit Scores
Before making a major purchase, whether it’s a house or a car, it’s wise to check your credit score at least three months before you sign an agreement.
While some lenders specialize in approving loans for individuals with low credit scores, some lenders may turn you away if you have a less-than-perfect history.
Each lender will have different criteria for an applicant to meet before approving a loan, so it is a good idea to understand your credit score and how this fits into your chosen lender’s requirements.
If you want to shop for a car loan on your own, make sure you research and compare the lenders that you have found.
You should also check for accreditation and reviews to avoid fraud, and to make sure lenders have your best interests at heart.
You can also use auto dealers, who will submit applications to multiple lenders to help you find loans with the lowest interest rates and terms that work for your personal circumstances.
Sources that can provide you with a car loan include:
- Banks and credit unions
- Online lenders
- Car dealers
Applying For The Car Loan
When you secure a car loan, your chosen lender has agreed to lend you the purchase price of the car, with repayments and additional interest set over a period of months agreed in advance.
Once an agreement is met, and you have secured your new car, you will then begin repaying at a set time each month.
It is important to remember that the finance company still owns the car until you make the final repayment, but you will be responsible for maintaining the car.
Make The Loan Payments On Time
To protect and increase your credit score, and avoid any late payment fees, it is crucial that you make your repayments on time.
As well as boosting your credit score, when the loan is fully repaid, the lender will report the account as closed and paid in full, which will remain on your credit report for 10 years from the closed date.
However, if you have any doubts at all about your ability to make repayments or find yourself in financial difficulty with no way to pay that month, please seek financial advice and support.