Car loans are incredibly valuable when it comes to helping you obtain the right vehicle you need. While many find paying the entire price outright to be the preferable option, the reality is that not many people can afford such a large initial sum. Thus, the car loan.
As a car buyer, you need to know what it entails when you do choose to take out a car loan so that you get an attainable and realistic financing deal that suits your financial circumstances. Today, we share a few important things about car loans you need to know before purchasing your coveted vehicle.
1. Your Credit Score Affects Your Loan
The first thing that determines the value of your car loan is your credit score. Credit scores give lenders an indication of how good you are at making payments on time and in full, assessed on a scale of 0 to 1000. The threshold of a good credit score can vary dramatically between financial institutions; it will depend on the financial provider you’re applying to, and the credit bureau that they request a credit report from.
Your credit score and credit history allow lenders to determine your capabilities to pay back a loan. It also gives them insight into your current borrowing position and how often you apply for finance. When your credit score is good, lenders are more likely to give you better loan terms and interest rates. A good credit score also increases your chances to get your loan application approved.
2. Get Pre-approved Financing
One of the benefits of having a pre-approved loan is that it guarantees you a loan to cover the cost of the car you’re planning to buy. Much like having cash in hand, it gives you greater leverage and a better buying and negotiating position to get the best deal from automotive dealerships. Along with a good credit score, you can get higher chances of getting a pre-approved car loan from trusted financial institutions or lenders like Nectar.
3. Budget for the Vehicle
Whether you get pre-approved financing or not, it’s imperative to buy a vehicle that will work around your budget. This means you need to review your existing finances and sort out the funds you have available to make repayments on a loan. Take note of additional costs such as licensing or registering your vehicle, as this will impact on that size of your initial payment.
When it comes to car loans, there’s nothing more important than being able to pay off your purchase without decimating your monthly income, so that you can fully enjoy the benefits of owning a car.
4. Plan Monthly Payments
You need to understand the factors that determine your monthly car payments. It may be your goal to have low monthly payments, but also consider the fact that this may require you to take longer loan terms, which may mean more expense in the long run. That’s why you need to look into other factors such as your total car deposit, your total loan amount, and your loan terms to figure out the best plan to repay your car loan.
A way to help you navigate your monthly repayments is to use a loan calculator lender like Nectar may provide. This will allow you to budget better at the outset, then plan out payments that will coincide with your financial goals.
5. Know the Contractual Terms
Finally, when you’ve sorted out your deposit and budgeted your ongoing repayments, it’s time to find a vehicle finance program that best suits your needs. Weigh your options and ensure that you’re comfortable with how much your vehicle will cost in total—including the total repayments you’ll make over the total loan term.
Some loans will allow you to pay your debt off with lump sums, offer lower interest rates or offer to increase your repayments if your budget improved. Once you’ve decided which best finance route to take, make sure to work with a trusted lending company where you can fully discuss your goals and contractual obligations in detail. Never work with a company that is not upfront about their terms, so they can work out the best vehicle finance for you and you can make the right choice for yourself.
Find a car loan that works for you.
Choosing vehicle finance can be a straightforward process when you start working out your budget, and work with what you can afford. This will significantly help determine the type of finance you need that will work for your current situation and your short term / long term goals. At Nectar, we offer the best loans can provide. We factor in your unique circumstance to give you the lowest interest rates possible. If you want to find out more, contact us today!