A car is, without a doubt, one of the most expensive purchases a person will make in their lifetime. The financing option you choose to make the purchase will affect your personal financial situation for years to come (till the loan ends). So, making a well-informed decision when choosing your car loan is very important.
So, what does one need to look for in a car loan? Here are some important aspects to consider when selecting a car loan.
The Benefits of a Pre-Approved Car Loan
A pre-approved car loan gives you a clear idea of what you can afford. Once you have a definitive amount as your loan pre-approval, you can make a sound financial decision, by choosing a car that falls within your affordability (and not stretching your resources too far).
Another benefit of a pre-approved loan is that dealers and car sellers tend to look at you as a sure thing. When you have a pre-approval, it means that you are quite serious about buying a car. And that gives them the push to give you their best offer, maybe even throw in a couple of extras to ensure they don’t lose your business. This, in turn, will give you the upper hand to negotiate a better price.
Enquire About Penalty Fees
If you like the idea of making extra repayments, paying more than the minimum monthly repayment amount, to close the loan off in a shorter period, then you need to check about any penalty fees that may apply. Some car loans penalize you for extra repayments, as it basically means that you won’t be paying as much as you would if you had the loan full term. Sometimes, even with the penalty fees, repaying the loan off faster still works out to be cheaper. So, this is another important factor to keep in mind when choosing your car loan.
Low-Interest Rate – Is It A Trap?
The low-interest rate should not be the only criteria you look for when choosing a car loan. Especially, when you consider the fact that many car loans have low introductory rates to attract customers, but, as the loan progresses, the interest rates become higher, putting you in a tight financial spot. If you find a car loan with an unbelievably low-interest rate, find out what the terms and conditions are. Chances are that they come with some caveats.
Buying a car is a big financial decision. Avoid getting into a financial crunch by knowing exactly how much you can afford to spend on a car, finding a good financing option and having a clear plan for the quick repayment of the car loan. By taking care of these aspects, you can keep your finances under control.
If you have an existing car loan and looking to sell the vehicle for cash, then its a must you should first clear the loan before you contact a buyer.