The decision of getting a new car can be exciting; whether it is your first one, or third. From researching the best models in the market to deciding on the color, you are bound to invest time and effort throughout the process. However, it can get overwhelming when it comes to deciding on the most suitable option to finance your car purchase. One of the most common type of auto finance are car loans. Car loans aid in conveniently funding your car purchase while the slew of offerings on the market can help in getting the best deals. It is extremely important to understand the different factors and issues that can be encountered when attempting to get a car loan.
- Note the loan term Today, most companies offer long terms on car loans. While this help one in enjoying a lower monthly premium payment, it may come with more interest expense too. Also, for used cars that have a shorter lifespan, it is better to do away with long loan terms. It is not pleasant to end up having to pay premiums for a car that has already died down.
- Check on the interest rate The interest rates for car loans will vary from one company to another. This makes it essential to compare the interest rates from different lenders before settling for the most ideal offer. You must also note that the interest rates are higher for loans that have a longer-term period. Choosing a shorter term is more likely to get lower interest rates.
- Credit score The credit history or score is a common factor considered by lenders when sanctioning car loans. In some cases, even the loan rate is fixed based on the credit score of the borrower. If you have a high credit score, you are more likely to enjoy easy loan approval with lower interest rates.
- Penalties and fees It is crucial to take note of any fees or penalties that are attached to the car loan. Process fees are common among banks and lenders when fulfilling the application process and sanctioning the loan. Some lenders maintain flat chargers whereas other charge a percentage on the total amount of the loan. The fees can vary, and so it is important to be aware and question if they are fair.
- Early repayment fees Ahead of signing up for a car loan, note that many lenders levy fees in the case of early loan repayment. This can add up the cost especially if you are trading the car for a better model. Make sure that you read this fine print before undertaking a car loan.
- Pick between a direct or indirect lender A car loan can be acquired directly through a financial lender or indirectly from a car dealer. While it is quite convenient to have the car dealer arrange for your car financing, they may have financial incentives or associated mark-ups. This can, in turn, increase your car loan cost. It is best to settle for a car loan from the dealer only after comparing the offering with the independent financing organizations.
