Editor’s note: This is a guest post from Marcela Dias of Webprofits
BUYING your first car can be daunting — especially if you also need to get a loan. This article gives some helpful hints for how to get a loan and what you need to look for.
Buying a brand new car can not only be exciting, but can also be quite expensive. These days, with living expenses so high, it can be hard to put away a lot of savings and can take years to build up a nest egg big enough to buy just an average new car outright. Banks, credit unions and other financial institutions offer the opportunity to take out a car loan, also called a personal loan, to help you fund your car purchase. While this can make the purchase a lot easier — and can help it happen a lot quicker — there are still quite a few factors to consider before signing on the dotted line. Here are a few areas of thought to get the process started:
1. Selecting a lender
While selecting a lender may seem easy — just go with the institution you bank with — despite your loyalty, your bank or credit union may not offer you the most competitive price.Before even investigating the loan, investigate the institution — especially if it is not a well known bank, or you are considering an independent lender. Make sure your potential lender is very reputable, has no horror stories floating around and that the entire package is up to industry standards and doesn’t cut any corners. With this in mind, independent lenders or credit unions can often be more competitive than the big banks, so don’t go past them as an option.
2. Selecting the package
Like any business arrangement involving money, it is important to get a good cross section of quotes before selecting a lender. Look for the best rates, combined with the package that best suits you. If doing initial research online, remember the comparison interest rate is closer to what you will be charged, than just the advertised interest rate. The comparison rate includes the interest rate, with the addition of any fees the lender may charge — but possibly not all the fees. Keep in mind, you may also pay administration fees, solicitors fees for preparation of the contract, and a range of other costs.
3. How much can you borrow?
How much you can borrow will be determined differently according to the lender you select and their specific policies. Some factors to consider include your income and expenditure, how much you already have to put towards your car, and how quickly you want to pay the loan back.
Most lenders have online calculators that will give you an indication, but always best to just ask your potential lender.
4. How much will repayments be?
Again, this will depend on the lender, the interest rate and all the fees in addition. Online calculators can give you an idea, so you know if the loan investigation is worth continuing, however, everything is subject to change, fees and additional policies, so get clear quotes and figures before signing anything or making your selection.
5. What happens if I can’t make repayments?
Like anything, if you can’t pay for it, you can’t keep it. Most lenders reasonably understand, if you just have a bad month, or something happens and you need an extension on your loan repayment. Keep in mind an extension will mean you pay more in the long term, as interest is calculated daily or monthly. Always talk to your lender before panicking, they will often help you work things out.Worst case scenario, if you can’t make any further repayments, and you don’t sell the car to repay the money, like all loans, ongoing unpaid car loans mean your vehicle may be repossessed.In general, always do your research, don’t take the first option you see, and always know what you can afford to repay!
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