Finance

7 Tips to Secure Your Car Loan

car loan

Buying a car is a big step. The purchase process can get overwhelming if you’re a first-time buyer, self-employed, or have a poor credit history.

Since the choice of vehicle requires consideration of several factors, you wouldn’t mind if the financing process is simple. So, you must seek finance options such as a car loan with flexible terms and no ongoing fees.

If you find the process of getting a loan complicated, the following tips can help you secure the loan easily and have a seamless car-buying journey.

1. Get pre-approved

Getting pre-approved for your car loan means a lender has agreed to loan the amount for buying your car. When you enter the dealership with pre-approval, the buying process gets expedited, and you could be driving your car within 48 hours.

Pre-approval can also be an excellent tool for budgeting as you know the maximum amount you can borrow.

2. Have a reasonable budget

The cost of gas and maintenance, and repair are not the only expenses you have when you buy a car. You also have to pay for car insurance, registration and stamp duty, which adds to the budget.

So, you must plan very well, or all these expenses can be a burden later.

3. Get the documents ready

You can’t buy a new car if you don’t have all the documents in place. So, review the requirements before knowing if you’re eligible for a loan. Remember, different lenders may have different requirements. However, you should definitely have these documents:

  • Identification proof like a passport, driving license, and birth certificate. 
  • Income proof like pay slips, employer and employment details, and tax returns.
  • Vehicle details like the make, model, price, registration number, and if it’s pre-owned or new.
  • Assets and liabilities like if you have other loans, debts, or own other vehicles or property.

4. Improve credit history

A bad credit score often causes hindrance in getting financial sanctions like a car loan. So, if you pay off your loans and debts in time, you can improve your credit score. A good credit score means you have to pay lesser interest on the loan amount.

The credit score also impacts the type of loan you get. With high scores, you become eligible for high-loan amounts and upper-tier loans.

5. Have a savings account

Saving up some money beforehand can help you put down about 20 per cent of the car’s price as a down payment on the loan. This way, you can avoid owing more than your car’s worth and have peace of mind.

Also, regularly contributing to a savings account helps the lender assess your financial responsibility and ability to manage your budget and develop a good impression.

6. Conduct thorough research

You may find several car loan products in the market. So, it’s better to do your due diligence in finding deals that suit your financial situation.

Further, don’t limit your research only to interest rates. Consider other factors like early repayment, monthly and exit, and entry fees.

When you don’t have any monthly account fee, all the repayments go towards the loan. Also, when there are no fees on early payouts or additional repayments, you can pay off the loan much early and be debt-free.

7. Check for extra repayments

You may get a pay rise which can help you save more money on your car purchase. You can clear debt and reduce interest when you pay more than the minimum amount.

However, you must ensure that your lender allows this without any penalties.  

You don’t want to make any mistakes till you have your hands on the steering wheel. So, you must sift through the contract carefully and sign it only after understanding all the terms and conditions. Be sure to clarify all your doubts. If you find the lender dodges your questions, it’s better to move to the next one.

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