So, your car is getting a bit old and tired – and you’re wondering whether the time has come to buy something newer? If so, you are probably also wondering what is the best way to finance your new car.
So here are five practical tips to help you in the process of getting your car loan.
1. Make sure you have a clean credit rating
Most banks and finance companies will be reluctant to lend you money if you have a history of poor credit. Some might agree to lend but will charge higher interest rates. So the first thing you should do is make sure you have cleared any outstanding debts before you consider applying for a new loan.
2. Work out a budget, so you know how much you can afford
Borrowing to buy a car will mean a commitment to monthly repayments over 3 years or more. You need to have a clear idea of your income and existing expenses, so you know how much you can afford in monthly repayments on your car finance. You can use our car loan calculator to help you crunch the numbers.
3. Compare different lenders
There’s a wide range of options for borrowing money for a car – from your bank through to smaller finance companies that specialise in lending money for vehicles. So shop around and look for the best interest rate. You could potentially save hundreds, or even thousands, of dollars in repayments over the term of the loan.
4. Read the fine print to make sure you really are getting the interest rate being advertised
Many finance companies will advertise interest rates as “from” a certain amount. This means they are advertising the lowest rate they offer – but it doesn’t mean that they will give that low rate to everyone. In some cases, the lowest rate will only apply if you borrow over a certain amount. Also, rates can change regularly, so make sure you are actually getting the advertised rate.
5. Consolidate other debts into one loan
If you have existing debts such as credits cards and hire purchase, it can often make sense to combine these into one loan – at a lower interest rate. Enquire of your prospective lender whether this is possible, It can not only reduce your total repayments but also make things easier to manage if you have only one monthly payment.
How much can you afford to borrow?
With interest rates now lower than they have been for many years (and likely to go even lower), the cost of borrowing to buy a car has become more affordable. This is great news, as it means you can afford a better car for the same amount of monthly repayments, compared with what it would have cost a few years ago.
Of course, you also need to use common sense. Don’t stretch yourself too far. You should make sure you have enough money left over each week to cover unexpected emergencies. So you need to work out a budget before going ahead with a car loan.
Use our car loan calculator to work out the repayments on the amount you are proposing to borrow. In fact, we can often go even lower than the repayments shown on this calculator, so please contact us to get a firm quote on your proposed loan. We can even get your car loan approved within 2 hours in many cases!