When it comes to acquiring a vehicle, one of the easiest ways to go about it is an auto loan. They’re simpler and more accommodating compared to banks, and are much easier to acquire when you’re trying to get a car with poor credit standing. Banks, whether it be for a personal loan, car loan, or mortgage can take weeks to process. And even then, going through the grueling steps does not assure you of acceptance. What’s more is that every time you apply for a loan, your credit standing takes a hit. Most especially if you keep getting rejected for them.
On the other spectrum, getting approved for car finance is a much simpler and faster process. In fact, it can be as quick as application and approval for a new credit card. This, however, doesn’t mean that getting a car lease, loan, or finance doesn’t require that you do your due diligence. Some research and preparation is still required — most especially if you want to get the best deals. If you want to set yourself up for better rates, there are three key things you must know:
What is your credit rating?
One of the biggest factors on approval, rejection, and interest rates of your car loan is going to be your credit standing. In particular, if you’re looking for bad credit car finance, you can automatically assume that you’d be spending a bit more on interest rates to someone with clean credit. That, however, does not mean that you still can’t get the best deals. If you’re a first-time car buyer, are a non-resident, or simply had a few financial hiccups in the past, knowing what your credit score is can help you plan out how you can save money while buying a car.
Remember that your credit rating is always going to be based on your credit reports. Depending on where you are, institutions like Credit Savvy (AU), FICO (USA), and Clear Score can help you figure out the most accurate (or close to) figures on your credit reports. The best part is that, for most companies, you can check your credit free once per year.
Take note that you won’t see the exact same credit rating that your lender or financing institution will see. However, getting as close to those figures can definitely help you figure out where you stand from a credit perspective and which companies to go to for car finance.
How much can you realistically afford?
Once you know your credit rating, you can now narrow down which companies you can go to. Whether it’s a bank, car dealer, financing company, or any alternative lenders, you can at least have a better feel for the kind of interest rates you’ll have. The next step now is figuring out how much you can realistically afford to pay after living expenses.
Even if you earn $1000 per week, if your expenses amount to $950 per week, then you can only truly afford $50 max per week. Remember that your expenses will always trump your income when it comes to considering costs. So the first thing you need to do is take your combined income plus leeway for incidental expenses, and then subtract your weekly expenses. From there you can mostly find out what your budget for others, in this case a car loan, is.
Car finance terms typically come in two, three, four, and five year terms. Of course, your repayments will be determined by the length of loan time — the longer the term, the lower the monthly payment. But this also means that you’ll be spending more in the long run with compounding interest rates. It’s still a good way to acquire a vehicle if you can’t allocate much for auto loan expenses. Remember that you still need to factor in registration, insurance, taxes, petrol, and maintenance when you set a budget.
One of the best things about being part of the age of the Internet is the fact that you have online tools like car loan calculators to find out how much weekly, fortnightly, or monthly cost of your loan will be. From these estimates, you can narrow down the type of cars you can realistically afford.
What kind of vehicle do you need?
Speaking of types of cars, after figuring out your credit and budget, the next thing you need to find out is what type of vehicle do you need. Of course, we all want the sleekest, newest, shiniest model, however this isn’t always realistic or practical for us at the present time. A few good questions to ask yourself when pondering on this would be:
- Do I need a vehicle for personal use or for business?
- Does it need to be a specific vehicle for trade?
- Will I be driving a vehicle just in the city or as well as in rougher dirt roads?
- Do I need a small, intermediate, or large vehicle?
- Will I be driving small children in the vehicle?
- Will I be driving manual or automatic?
The idea is, before choosing for style, you first need to choose for lifestyle. As a vehicle is a long term contract, that can typically be a bit expensive to get out of, you want to make sure that you select the right vehicle for your needs. Imagine being stuck in a three year contract with a small car, because you wanted to save up as much as you could, while actually needing a vehicle more suited for a middle sized family? It’ll only end up with frustration or a need to get a second car — which would end up in more costs.
When it comes to getting the best auto loan deals, it’s not always about simply getting the cheapest in the market. Most times, not doing your due diligence is a sure way to set yourself up for failure and/or frustration. But simply taking the time to find out what your credit standing is, how much you can realistically afford, and what vehicle is best suited for your lifestyle, can definitely simplify your car finance and help you get the best deals. Good luck!