You’re probably aware that purchasing a car is not cheap. There are several factors to consider, including the cost of the vehicle and other fees. These are only a few of the expenses we must deal with when acquiring a vehicle. However, there’s another key element to consider: taking out a loan. This isn’t as simple as it appears, and there are certain things that you should think about before getting an automobile loan. Continue reading if you don’t know what those five items are. We’ll tell you all about them right now!
What’s your credit score?
Before applying for a vehicle loan, you should check your credit score. This number is significant since it will tell a bank whether or not you can afford the monthly payments. More significantly, it reflects how trustworthy you are at ‘repaying’ debts that you’ve previously taken out. In other words, if there are any errors in your credit report, you may be charged higher interest rates. You should also make sure there aren’t any issues with your credit history. Read more on the minimum credit score required for a car loan here.
The bigger the down payment, the better
Cars are now sold on credit, which means that you must have a down payment of 20% before being approved for one. And it’s great news because it’ll save you money in the long run. If you spend $15,000 on a vehicle and put down only 10%, for example, your monthly instalments will be around $150 to $200. But if you make a 20% down payment, your payments will be less than half that amount!
How long do you plan on keeping the car?
Another thing to think about before taking out a vehicle loan is how long you intend to keep it for. This may seem like a minor point, but if you don’t pay attention, you might wind up paying more than the car is worth. Let’s use an example: suppose you’ve been given a loan for five years and plan to sell your automobile after three years. In this scenario, you’ll be required to pay the final two years of monthly repayments even though you won’t be using or owning the car anymore!
If you’re still hunting for that perfect ride and not sure what to look for check out Driva’s complete first car buyers guide here.
Don’t borrow more than you can afford
Many individuals overlook the lasting consequences of obtaining a vehicle loan. This is significant since you must ensure that your monthly payments are within your means. Otherwise, you won’t be able to pay them off, and you’ll find yourself in a bad situation.