As you know, buying a car is not cheap. You need to take into account many things such as the price of the car, the registration fee and whatnot. These are just some of the costs that we have to deal with when we buy a vehicle. However, there’s another very important aspect to consider: the cost of taking out a loan. This is not as simple as it seems, and there are certain things that we need to take into account before getting a car loan. Now, if you don’t know what those five things are, keep reading. We’ll tell you each one right here!
What’s your credit score?
The first thing you should do before getting a car loan is to check your credit score. This number is important because it will allow a bank to determine whether you can afford the monthly repayments or not. More importantly, it also represents how reliable you are when it comes to ‘paying off’ debts that you’ve previously taken out. In short, if there’s anything wrong with your credit score, you may have to pay higher interest rates. You should also check if there are any mistakes in your credit report.
The bigger the down payment, the better
Nowadays, banks require a 20 % down payment before they allow someone to obtain a car loan. And this is good news because it will help you save more money in the long run. For instance, if you spend $15,000 on a vehicle and put down only 10 %, you’re going to have to pay monthly instalments of around $150-$200. However, if you make a 20% down payment, your repayments will be less than half of that amount!
How long do you plan on keeping the car?
Another very important thing you need to take into account before getting a car loan is how long do you plan on keeping it for. This may sound like an unimportant detail, but if you don’t get it right, you could end up paying more than what the car is actually worth. Here’s an example: let’s say you’ve been given a loan for 5 years and decide to sell the car after 3 years. Well, in this case, you’re going to have to pay the remaining 2 years of monthly repayments even though you don’t use or own the vehicle anymore!
Don’t borrow more than you can afford
As it often happens, many people forget about the long-term implications of getting a car loan. This is very important because you need to make sure that the monthly repayments are within your budget. Otherwise, you won’t be able to pay them back and you’ll end up in a very difficult situation. You should also remember that it’s better not to borrow more than you can afford because the interest rates will be significantly higher and you’ll end up paying even more money. Check out the Driva car finance platform to find your best possible personalised rate and compare 30+ lenders in less than 60 seconds.