You have finally decided you are ready to take a step up in the world and buy a car. Congrats! Now it’s time to find the loan that works for you.
Figuring out how much you can afford is one of the most important things when buying a new or used car, but there’s more to consider when it comes to financing than just your budget.
Your credit score
Your credit, which is determined by the information in your credit report, will be one of several factors that lenders consider when you apply for a car loan.
And if you have any derogatory items on your credit, you’ll need to know how they could affect the interest rate (APR)you qualify for.
So what is considered on your credit report? Below are some things that can affect your credit score, so it’s best to check your report before you apply for a loan:
- How much debt you have
- How long you’ve had certain accounts
- Whether or not you paid bills on time
- How much of the available credit limits you use
Make sure you check your credit score so you can get an idea of what types of loans you’re eligible for, and so you can fix any errors if need be, before applying for loans.
Interest rate and payments
Most of the time, your interest rate is directly related to how risky you are as a borrower. And high risk equals higher rates and larger down payments (if you can afford one).
There are exceptions to this rule—especially for classic car loans —but if you have poor credit or no credit it’s more difficult to get a desirable interest rate.
The car you choose can also affect the amount of money you’ll need for a down payment and monthly payments. For example, if you wanted to buy a $30,000 SUV with poor credit and no prior loans in your name, it’s likely that you’d need to put more than 20% down in order to geta loan for the whole amount.
If you can’t put at least 20% down, you’ll likely need to buy an older used car than a new one, simply because of your down payment options and lower interest rates on cars with more miles.isaimini
Shopping around for the perfect loan
Once you decide whether or not you can afford a certain vehicle, or what vehicle you want to buy, it’s time to start shopping for a loan.
Auto loans can be a bit confusing, but if you know what you’re looking for and plan ahead, they don’t have to be overwhelming. And if you’ve had any credit problems in the past–or none at all –don’t despair! A good car loan is out there for you.
Here are some key things to keep in mind when you’re looking for a loan:
Loan terms: This is the amount of time you have to pay back your loan. Most car loans last anywhere from 1 to 7 years. The longer the term, the more you’ll end up paying overall in interest.
Interest rate: The interest rate determines how much your loan will cost you over time. When borrowing money, it’s always best to take out the smallest loan possible to pay it back in the shortest amount of time.
Fees: There will be several fees that come with a car loan, such as processing and underwriting fees. Make sure to understand what each fee is and how much it costs upfront or over time.
Whether you’re specifically looking for car finance in Perth, or you’re from anywhere else in Australia, make sure you have the time to find the perfect loan for you! Check out driva.com.au to get started.