Important steps to follow when getting a car loan

Buying a car may not be the biggest investment you make, but it will cost you a lot of money.  Many people may not afford to purchase a new car out of their pockets. The next best option is to get a loan, buy a car and clear the loan payments later. It is important to prepare yourself financially before you take up a car loan. If you have enough down payments, you can start the process of purchasing your car.

Here are 7 important steps to take when getting a loan and buying a car

Do you have the right credit score?

Your credit score will determine the amount of money you will get from the lender. Both banks and auto loan dealers check the credit score before approving your loan. The amount of money you get depends on your credit score and most of all the lender’s rates. Different lenders have different criteria when it comes to dispersing car loans.

Keeping your application within 14 days will help reduce the negative impacts that come with a bad credit score.

Get a pre-approval then shop

It’s always a good idea to get a pre-approval before you shop for a car. It’s not logical to walk into an auto dealership without financing offers from an auto loan dealer or a bank. You can get a pre-approval letter from online lenders, a bank, auto loan dealers and credit unions. A pre-approval is like a guarantee that you will get the money for the bank. You can use it as additional leverage and negotiate when you are shopping for a car.

Calculate the cost before getting the car or the loan

Before you get a loan or a car, ask yourself if you can afford it. You must understand that you will make a down payment, and cover a monthly payment to clear your car loan. Making a large down payment will save your finances. You will receive a smaller loan with less interest, which is a win on your side.

Understand the dealership before you make any decisions

Sometimes, a financing can appear more attractive than it really is. If the deal seems too good to be true, read all the rules and regulations before you make a final decision

Here are some of the things you should look out for

The length of the term

The deal may have a longer payment plan than you expected. This means the lender will charge you lower monthly repayments. Long term loans will be a financial burden since the car depreciates in value.

 

The interest rates

Interest rates vary from lender to lender.  Ensure you compare different loan deals before you make a final decision.  A longer loan payment means less monthly repayments but more interest rates payments

The penalties

Some lenders impose pre-payment penalties on unsuspecting customers. This means, when you clear your loan early you will have to pay the lender a documented amount. Make sure you read the entire document, or hire a professional to do the work before signing any deals.

Final word

Follow these steps when getting a car loan and the process will run smoothly for you. Always hire a professional when dealing with legal issues to ensure you are signing up on legal deals with acceptable interest rates.