Car loan can be an essential path to acquiring your dream car. Judging by the fact that millions of people drive to work everyday, it goes to say that many people are dependent on their vehicles and car loans, thus it’s imperative that you know all comes with the car loan before you sign up for it.
Car loan, may be just what you need to get that mobility you so desire. Be it as it may, you are advised not to just jump into signing a loan in a hurry without reading the fine print associated with it. It is very important, that you understand what you are signing up for before you take a car loan, in order to maximize the fully the benefit of your car loan.
Here, let’s take you thru 8 things you should consider before you sign up for that car loan.
Vehicle Price / Loan Terms
To ensure, that you get the best possible price on the car, you are advised to always negotiate the price of your car separately to the terms of your car loan contract. Once this is done, you can be sure, that you have the best possible price on the car first, as well as the best possible car loan. This enables you see the true costs of the car loan you are taking out.
Once you take out a secure car loan, you’ll need a comprehensive car insurance as one of the conditions of the final car loan settlement. Here, you are advised to compare various providers for the types of car you’re interested in before you purchase your car to ensure that you have a rewarding deal.
It is also expedient, to consider loan termination insurance, if you are not sure if you have income protection insurance or if your income protection might not be enough to cover the car loan payment. With loan termination insurance, you have coverage for the balance of your car loan if you can’t afford the payment.
Checkout the right credit score
Since your credit score, is the single most important factor in determining what type of loan you get from a lender, it is very important that you find out the particular credit score applicable to the lender you wish to get a loan from.
Credit score, varies with each lender. Different lenders, have different criteria for their credit score you need to qualify, thus whether you are going thru a bank, an auto dealer or the dealership itself, the rate depends on it.
A copy of your credit report, can be accessed via the three main reporting bureaus for free.
Get a pre-knowledge of the processing fees
Some loan requests, can be accompanied by processing fees charged by the bank. Thus, to be on the safe side, you are advised to opt for the bank that charges low processing fees. You can also check other charges like late payment charges in case you missed your monthly payment.
Is the interest rate good?
High interest rates, can affect the final price of the car. Interest is applied on longer loan, which is why you should opt for a loan which can be paid in shorter period of time.
Note, interest rates may differ, which is it is very necessary that make a good comparison of different banks or lenders before you make your final choice.
Length of term
The length of term, may vary depending on the lender. Thus you can choose to pay your loan in different periods of time as agreed by the lender. Most payment period can vary from 1 year to 7 years.
Is there a pre-closure penalty?
Pre-closure penalty of a car loan implies that you’ve cleared your debt before the stipulated time, and that you’ve also saved on the amount to be paid as interest. Thus before you sign up for that car loan, check if your bank charge a pre-closure penalty.
Ask if you can include a balloon payment
Ask if your lender will allow you include a balloon payment. Balloon payment can be used if you can’t afford large monthly repayments. With balloon payment, in your car loan plan, you can get a reduced sized of the monthly payment. A balloon payment enables you repay a large chunk of your loan at the end of the term, when you get a lump sum for trading in or selling the vehicle.
Getting a car is an important decision you take in your life, thus to avoid creating difficulties for yourself in the future, make sure you review the car loan terms to enable you purchase a cost effective car that will make instead of mar you.