Are you looking to get a loan for a new vehicle but aren’t sure what type of loan is right for you? Here we’ll explain the advantages and potential pitfalls of car finance to help you make the right decision and get the best bang for your buck possible.
Credit Ratings
Your credit rating is important for you applying and qualifying for a car loan. The better your credit score, the easier it will be to get your loan approved. However, it should be noted that even with a not-so-amazing credit score there are still plenty of ways for you to get a car loan, which we’ll explain below.
Learn more about credit ratings.
The Basics
When you enter an agreement for a car loan, the amount of money lent to you has to be paid back within a certain timeframe, usually in regular repayments such as fortnightly or monthly.
The length of the loan term can vary, usually somewhere between 12 months and 10 years, depending on the lender and how much you borrow.
In addition to requiring you to pay back the amount you borrow, banks and private lenders will also charge you interest on the balance, which could be either at a fixed or variable rate, as well as any fees and charges stipulated in the car loan contract.
The Lenders
Primary lenders such as banks will loan you money for pretty much anything, as long as you can prove you have enough income to repay the loan over the term. As bank loans can vary from institution to institution, it’s best to do your research before deciding if a bank loan is right for you.
If you don’t qualify for a loan from a bank, it’s not the end of the world. Private lenders – separate from banks – also provide finance solutions with more flexible criteria for loan approvals.
This is a great option for those that are trying to work on improving a poor or average credit rating, or for young people such as students that wish to build one up. Private lenders are also often very quick in approving people for loans, meaning they can help you get the keys to the car you desire quickly and with little fuss.
Be Wary of the Traps
If you’re visiting a car dealer and they offer you a car loan interest rate that’s suspiciously low – more often than not – it’s a trap. Dealers offering lower than expected interest rates on car finance are often offering you the car for way more than the current market value – which means it ends up costing you much more than anticipated.
Hidden fees can also make you have to spend more over time. You’ll want to know all the conditions of your loan and the loan repayment structure before you enter in to a loan agreement.
Perhaps there’s an interest rate change clause in the agreement that’s not necessarily provided to you in the application process, or pricey late-repayment fees that blow out your repayment costs?
It’s better to dot the I’s and cross the t’s before you sign yourself in to a lengthy repayment schedule, so talk to your lender before signing on the dotted line as reputable loan providers will give you all the information you’re after upon request.
Also, don’t forget to factor in insurance, petrol and maintenance costs for the car you buy. Make sure you can afford not just the loan repayment, but your vehicle’s upkeep too!
There’s no need to become another statistic that has over-shot what they could afford, or let insurance and maintenance lapse; ending up with a bill bigger than the initial cost of the car itself.
The Verdict? Finding a trustworthy lender is important.
Ready for Action?
Talk to Yes Loans today to find more about our fast, efficient car loan options. We know that cars on the market – especially good value ones – don’t stay advertised for long. The sooner you have the money, the sooner you can buy that dream car.
Our car loan specialists will guide you through all the ins and outs of the loan process so you can be confident in being able to easily budget your repayments and car maintenance costs.
Yes Loans also has a handy loan calculator so you can get an initial idea of your borrowing power.
Check out how Yes Loans can provide you with the financial aid you require here, so we can help get you into the car you’re looking for, fast.