Questions to ask yourself before you apply for a car loan

posted by Chris Valentine

More people than ever are choosing to get their next car on finance. If you’re looking for a new car and are considering a car loan to fund it, there are a few questions you should ask yourself before you start applying. Car finance is pretty much straightforward and if you make all your repayments on time and in full, it can be really beneficially. You can get the car you want and also improve your credit score at the same time! If you’re considering a car loan, here’s the best questions you should ask yourself before you start applying…

Can I afford the monthly payments?

This is one of the biggest things you should consider. You should make a car loan budget before you start applying, this budget should be realistic and affordable. You should also factor in other additional costs such as road tax, car insurance, fuel costs, breakdown cover, maintenance and servicing costs and any unexpected repair costs. If you can’t afford your car loan and continuously miss payments, then your credit score can dramatically decrease and can limit your options in getting finance in the future. If you are struggling to meet your repayment schedule, you can call your car loan provider to see how they can help.

Is my credit score good enough?

Having a good credit score can make it easier to get approved for a car loan and you can also benefit from lower APR’s, which means you won’t pay as much interest on top of your loan. If you are applying for car finance with bad credit, you may find it harder to get approved. However, it is not impossible! Many car loan providers also take affordability into account to get you approved, this may mean supplying bank statements to show your income and that you could afford a car loan and be trusted to pay it back each month. If you’re unsure of your credit, you can check your credit online for free using a reputable credit referencing agency such as Equifax or Experian.

Do I need a new car?

Many people still believe that you can only get a car loan for a brand-new car from a dealership. However, this isn’t true. There are now many options available to get a used car on finance. There are many online car finance providers who help match you up with the most suitable lender and sort your finance for you. You can then walk into a dealership with the best finance deal already in your pocket and get a used car within your budget. There are a few limitations to getting a new car on finance such as age of the vehicle, so be sure to do your research before you choose the car you want.

Have you done enough research?

Car finance is straightforward in theory. However, there are a few types of car loan which are most popular, such as Hire Purchase, Personal Loan and Personal Contract Purchase. Each one is different and can be more suited to different individual depending on what you’re looking for. You should also have a quick look at different types of car finance jargon. You don’t want to get bogged down by words you may not understand so put your best foot forward and do some research prior to application! If you’re signing a car finance agreement at a dealership, don’t be scared to ask questions on things you don’t understand or aren’t clear on. A car loan agreement is a legal document, so it’s best to be 100% clear on what you’re signing up for.

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