A car loan comes in handy when you have low equity but have a regular source of income. But getting a car requires a lot of thinking as it involves large amount of money and long term commitments. Simply knowing that you can handle the payment and you have all the legal documentation that is necessary to obtain a car loan, does not mean you are ready for it. In order to make a wise decision about choosing a car loan, there are a few things to ponder on.
- Financing. You can get a loan straight from the car dealer for a faster and more convenient processing. Car dealers do not require as much paper works as banks and financial agencies do, but the financing schemes they offer are usually more expensive. Compare prices and financing schemes to get the best deal.
- Interest rate. Again, this may vary depending on the institution you will take the car loan from. Interest rates are what you will pay on top of the principal cost of the car, and are generally charged on a monthly basis. Interest rates offered by car dealers are typically higher than the average. If you must get a car loan from the car dealer to save on time and effort, bear in mind that you can also save a lot of money finding the car dealer that offers the lowest interest rate.
- Extra fees and charges. Before signing the contract, check for establishment fees, annual fees, and penalties for early and missed payment. You do not want to pay more than what you budgeted for. You can ask the rep for this information, but it is so much better to see for yourself.
- Repayment terms. The higher the down payment, the lower the monthly repayments will be. Repayment terms usually last from 1 to 5 years it is advisable to choose the shorter term not just to finish quicker but also to minimise the interest. Determine if the financier allows flexible terms if you can make payments weekly, biweekly, or earlier than the due date.
In conclusion, when you cannot wait any longer to have enough cash to buy your dream car, a car loan can be your best option. However, a car loan can be a serious problem if not enough deliberation is done beforehand. Among the many factors to consider when getting a car loan and comparing car dealers and 3rd party financiers include the financing scheme, interest rate, hidden fees and charges, and repayment terms.
About The Author
This guest post was written by Michael. Michael is a personal finance expert and content writer for carloan.com.au.