Buying a new car is exciting and whether this is your very first car or you’re about to upgrade your little 1600 to a 2.2, there are a few crucial things to consider before choosing the vehicle finance to go with your new ride!

TIP 1: Make sure your credit is squeaky clean!

When it comes to car loans, getting a loan isn’t always a sure thing. Having a poor credit record can hurt your chances of getting approved. In the end what should be an exciting time will become somewhat of a complicated and difficult time. Another point to note is that should you manage to get a car loan, it also isn’t certain that you’ll be offered a great interest rate. So, you must make an effort to clear any debts and ensure all your regular payments are being met. 

TIP 2: Have a clear purchase figure in mind

Car loan calculators are great when trying to figure this out. Pull out your bank statements, go through your expenses and create a budget for your new vehicle. Once you have a comfortable amount in mind, remember that there will be loan processing fees as well. Once you know how much you can afford to repay in installments you can also figure out what a healthy purchase price will be. 

TIP 3: Limit the number of applications you submit

Typically, we want to find out which lenders offer better interest rates or have the best service when it comes to car loans. We also tend to want to know which ones are a little sticky when it comes to certain things, such as your credit history! Do a little research before applying to various lenders to find out which lenders are excluded based on some of your non negotiable requirements. There is no need, therefore, to submit too many applications to various lenders, as all it will do is negatively affect your credit rating.

TIP 4: It pays to compare car loans

Although we just mentioned not submitting too many physical applications, it is still wise to do your homework and shop around for deals on car loans. Make sure that you understand the policies and pricing options that go hand in hand with each lender. It could save you thousands of dollars if you perform this exercise. It doesn’t matter if you’re a Rockefeller or not, no one can afford to waste money, so do some comparisons and save.

TIP 5: Credit cards can potentially be a better option!

This is sound advice if you’re looking at only borrowing a small amount. Credit cards can offer you an interest-free period that might very well be beneficial for all the small-time borrowers. So, if that is the case, consider this option because it means if you pay back in the honeymoon period, you even get to avoid serious reversion rates and still allows you to pay it off. Always know and understand your options, that way you will not lose unnecessary money due to fees and other unknowns.

TIP 6: Secured loans vs unsecured loans; your choice!

Unsecured loans are available to everyone who has ever needed money for something and did not have security to offer up. This is great, but it’s a high-risk loan for the lenders. On the other hand secured loans, are loans that are less of a risk due to the fact that the loan is directly attached to an asset. With car loans, that would be the car. Just to clarify what we mean - should you default on the car loan, i.e. be in a position where you are no longer able to afford the repayments - the lender can repossess the car and sell it to reclaim the money you still owe. Albeit at a lesser price than the true value of the car.

TIP 7: You’ll only know your rate once you apply

There are always billboards up with lenders offering great options and rates for your car loan. This advertised rate is based on an average individual with a good credit record and it's also the rate that was offered at the time the advert was created. The only true way in which to know the rate you’ll be getting is to apply. Rates depend on you as an individual and change rapidly due to various micro and macro economic factors. Make sure you always check with the lender before you become set on a certain loan product. 

TIP 8: Save with debt consolidation

Consolidating debt can definitely affect the interest that you end up paying back but makes life simpler since you only have to manage one large payment as opposed to many small payments. It’s also simpler to keep track of one payment, so, all in all, it’s a great tip to consider!

TIP 9: Early settlements aren’t always cheaper

You might believe that settling a debt has to be beneficial to your wallet at the end of the day, but the facts prove otherwise when you’re with a lender that has high early exit penalties in place. You need to ensure that should you choose to settle at any point during the loan period, you will not be heavily impacted by high penalties. Making additional deposits into the loan account to speed up the loan is certainly a good option, but again some lenders don’t allow it. Suss these things out and understand all the fine print before committing.

TIP 10: Organise your finance first 

Shop second! Don’t make an offer to purchase without knowing how much money you will be approved for on your car loan. Remember that there are variables that influence the lending decision if you're buying second hand. These include the age of the car, the condition and the price and you can’t know what the lender will approve until you submit the car you ultimately want for their consideration. So, get your finances sorted first and shop for the car only after you get your car finance secured!