6 things you need to know before applying for a car loan

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Lenders will check your credit

You’ll need good credit to secure a car loan, not only because you want to get the best rates, but also because significant amounts of money are at stake for lenders. A bad credit history is seen as a sign you might be an irresponsible debtor. This makes lenders more reluctant to hand over large sums of capital on trust, which in turn prevents some people from being able to get the car they need.

If you have any issues with your credit history it’s worth sorting them out before applying for a car loan. You can check your credit file for free to see what lenders will see.

Applying online is the easiest way to find an auto loan

It can be pretty stressful trying to find the perfect car loan, so the easiest way is to finance a car online, there are several great platforms available such as Driva for this. You’ll be able to compare all of your options in one place and ensure that you’re getting the most competitive rate possible.

The most important thing with online search is to read the small print. Pay particular attention to any penalties for early repayment, as well as interest rates and any fees you might end up paying if your circumstances change after taking out the loan.

Legitimate lenders will treat you fairly

Your lender will probably contact you via mail, email or phone. They won’t call out of the blue asking if you’re interested in applying for a car loan. It’s illegal for them to cold call you just to see if they can sell you a loan that may not suit your needs. If someone is doing this to you, they’re not a legitimate lender.

You can get pre-approved for a loan

Pre-approval is when the lender gets back to you once they know what type of car and loan you’re looking for. This is useful if you’d rather start shopping for your new set of wheels with a set limit in mind. Even when you’ve been pre-approved for a loan, you don’t have to buy it. The lender still has to perform checks on your credit history and financial situation before the deal is closed. If they’re not happy with what they find after that, or if something changes in your personal circumstances, then they’ll drop the car loan deal.

Consider making a deposit

Auto loan lenders are more willing to give you money if you have some cash of your own set aside for when it comes time to buy the car. You can ask the car dealer if they’ll accept this instead of paying in full on the day you buy, which will cut down on interest costs when you take out an auto loan. Putting down a deposit will also reduce your monthly repayments, which will decrease the amount you’re paying overall.

Make sure you’re financially ready to buy a car

When you take out an auto loan, it’s important to be aware of the underlying reason why you’re doing it. If your only motivator is that you want that new car because it looks nice or because your friends have one then chances are that the financial consequences of taking out a car loan will end up being a burden.

The best time to take out a car loan is if you have a well-thought plan for how it will help improve your life or at least make life easier. That way the financial consequences will be much more manageable once you decide to take out an auto loan.

Doing all of this research and preparation makes it more likely you’ll get a great deal on your new car, and therefore be able to repay the loan without having any issues.

 

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