Buying a car is an essential investment. From getting the right design, features, and model, there are various other factors to consider, and knowing whom to borrow from is equally important. Generally, banks have three auto loans –loans against cars, used car loans, and new car loans. Therefore, you ought to identify the type of loan you wish to take before setting out to look for a financier. You will need to know if you want a new car or a used car. Once you have narrowed it down to your dream car, getting a lender will be your next step. Consider below tips when choosing your car loan financier;
Budget, tenure, and interest rate
When choosing your car, you will have a rough estimated budget for it. However, ensure that you include the running cost for the entire year. Another hidden cost may stretch your budget upwards, yet you have already signed the agreement. One way to avoid overspending on car loans is securing a low-interest rate. You will shop around from different lenders to compare the payment terms, including their rate of interest. Choosing a minimum loan payment tenure may help you save money in the long run. For instance, you may get a smaller EMI amount for five years, yet you will spend more on interest than shorter duration.
Compare Finance Options
When it comes to financing your car loan, you have options of getting funded on-road price that include showroom price plus the registration fee and accessories or get an ex-showroom price. You will also get to choose your preferred loan type, whether fixed interest rate loan or variable rate if interest depending on your budget. To get the best car loan lender, you will need to compare the terms being offered by different financing institutions. Moreover, ensure that you understand the pricing, interest loans, and repayment terms before signing the agreement.
Inquire about Prepayment
It would help if you asked your lender about their car finance charges. Most banks charge foreclosure fees, prepayment charges, and other fees when you want to pay off your loan before the tenure ends. As such, it is better to choose a lender that will offer minimum charges for your prepayment. For instance, you may have taken a car loan of five years, but then you get finances to offset your loan term. Due to such incidents, ensure that your lender can give you favorable charges. Some banks do not levy foreclosure fees after two years of your loan repayment. It would help if you gave preference to such a lender.
Lastly, look out for the processing fee since various financiers charge different fees. Therefore, a comparison of several lenders may help you make an informed decision. The common charges for a car loan include processing fee, credit report charges, documentation fee, stamp duty, loan cancellation charges, swap charges, among others. Furthermore, always scrutinize offers and schemes provided by the financial institutions and banks. Some offers may look attractive to lure you, but later, you come to realize that it was not as cheap as you thought.