Five Things You Should Do Before Applying For A Car Loan

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Things you should know before taking a car loan

You are tired of your old beater and ready to upgrade to a newer, more reliable model. Before you apply for that car loan, here are five things you should do to ensure that you secure the best possible loan by careful assessment of your auto loan financing options.

Affordability. Consider carefully what type of car auto you can really afford. We are always sidelined by the quoted price of a car and assume that the tagged price is all we need to consider. However, you need to look at all aspects of the bank auto loan. What will it cost you in car loan interest and service charges for the duration of the auto loan and, will you be able to manage the payments today and tomorrow?. There are several car loan calculators and auto loan calculators available online that would provide you with some important information in this regard.

How is your credit? You really don’t need any surprises when you go for that car loan so it is imperative that you clear up old debts that could harm your car loan application. While bad credit financing is available and you can obtain auto loans with bad credit, the auto loan rates for bad credit are quite high. You should first get a credit report and review carefully. If you have no credit (no loans, credit card) it would be a good idea to establish some credit before applying for the loan. No debt does not necessarily mean you have good credit.

Compare car loan rates. When shopping for a car, we are often drawn to the dealership first. This is understandable since that is where the shiny new cars are located. The problem is that we are then subject to just one car loan quote – that of the dealership. Purchasing a car and securing a car loan warrants the same diligence that would apply to any on other shopping expedition for high priced items. Just securing a loan with half a percentage point interest lower than the other can make a huge difference in the overall cost of the car.

Bad credit . There are many finance companies that cater to people wanting car loans who have bad credit. Consider the many lenders online who offer car loans even with bad credit. Due diligence should be exercised when looking for bad credit auto loan financing. Check out the lender and ensure you are satisfied with the terms offered. Better yet, check out more than one lender and compare offers. You should know that your credit history will determine the kind of interest you pay and the terms of your repayment.

How long do you intend to keep the vehicle? This is a good question to ask before taking a car loan. Of course, you can’t tell what the future holds, but you should have a fairly good idea whether the car loan is for the purchase of a car you will keep for the next 10 years or whether you will want to buy a new one in about 3 years. Your answer to this could determine whether you even need to purchase the car outright or lease. Regardless of which option you choose, it is still essentially a car loan for a specified period.

Before taking out a car loan, ensure that you shop around for the best auto loan rates, check your credit history and consider your financial status today and what it will be in the future. If you have bad credit, you could still get a car loan even though it may cost you more in the long term.

Buying a Vehicle With Bad Credit

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Comments 2 comments

Simone Smith profile image

Simone Smith 5 years ago from San Francisco

These are five, very important things to do! Thanks so much for outlining them here.


Joan King profile image

Joan King 4 years ago Author

Thanks for reading

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