When shopping for a used car, the last thing we want is a lemon. But what about a car loan? The wrong car loan can end up costing money, stress and hassle so it’s important to know what to look for. Here are our top tips to find a loan that won’t leave a sour taste in your mouth.
Look for a fixed interest rate
Unless your budget means you can afford to take some risks, it’s definitely best to get a fixed interest rate. Your repayments will remain the same across the term of your loan. Which means no nasty surprises and no complicated payments to budget for.
Get a loan you can afford
Sounds like common sense, but it’s not always easy to know how much you can afford. Putting together a basic budget is a good place to start – sorting through your bank statements and noting down income and expenses. Since you might be paying a loan for several years, remember to think ahead – do you expect any changes that might affect your income? A responsible lender will always check your affordability of a loan before approval, but it’s always a good idea to do your own calculations too.
Don’t just focus on monthly payments
If you’ve got low repayments you’re getting the best deal, right? While you of course need payments you can afford, you should also consider the overall cost of the car loan. A $10,000 loan at 20% interest over 12 months will cost $11,052. The same loan at 10% over 60 months will cost $12,717. You’ll also need to add any fees for the true cost.
Remember interest rates aren’t everything
Interest rates are of course an important factor in choosing your loan, since they determine how much your loan is actually costing you. But you’ll also want to check any fees and charges, and ensure you’re using a reputable lender. A low interest rate across ten years can cost more overall than a higher interest rate over a few years.
Know when to apply
If you’re looking for loan approval, sometimes it’s not a matter of if, but when. While it’s still possible to get approved with Sprint with bad credit, as responsible lenders we do need to ensure you can afford it. To improve your chances of a big fat ‘yes’ you’re best to apply when you’ve been in employment with a stable income for 3 months or longer. You also want clean bank statements for the last few months – minimal defaults and unarranged overdrafts. Avoiding payday loans and gambling is also a good idea.