Most people intending to purchase a car opt for a loan. It is important to consider a few factors before taking a loan. Mistakes while taking such loans can make you lose a lot of money.
Important factors to consider for a car loan
Negotiate the purchase price
A common mistake people make when opting for car loans is focusing on the monthly instalment amount rather than the price of purchase. It is advisable to first negotiate on the total purchase price. Revealing your monthly paying capacity to the salesman at an initial stage may provide him with an opportunity to hide costs.
Evaluate your credit score
It is advisable to check and evaluate your credit score prior to approaching a car finance company. The credit score defines the interest rate of the car loan. Borrowers with good credit scores can secure a better rate of interest than those who may not have an impressive score.
People who are aware of their credit score are in a better position to bargain regarding the interest rates. Prospective buyers can find out their credit score through various organizations. This helps them evaluate the amount and interest rate they are qualified to get.
It is advisable for borrowers to exercise extreme caution while choosing between low interest rates and cash rebate options offered by car loan providers. Most loan providing institutions provide low interest rates only to people who possess a good credit score.
Negative equity forward rolling
If you own more money on your car as compared to its total worth, the situation is called ‘upside down’. It is important to be cautious if the dealer gives you the option of folding the negative equity in the next car finance deal. This usually implies that the amount will be added in the purchase price in the future deal.
Some other aspects which may be considered by borrowers include:
- Avoid including extra warranties in your car loan.
- Avoid including various add on in your car loan.
- Keep a check on the fee charged by the dealer.
A few cautious steps can help you save a lot of money on your loan.