Car Financing: 4 Things to Know Before Getting an Auto Loan to Buy a Car

Things You Should Know When Getting an Auto Loan

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All or at least most of us have a dream car they would like to own at least once in a lifetime. But most of these dream cars don’t come cheap. The good thing is that you don’t always have to have enough money to buy the car in cash. You can always get an auto loan and pay it back in installments.

But then again, not all loans are equal. Before you start Googling cars and car loans, it is important to familiarize yourself with a few things revolving around auto loans. Here are 4 things you should know before getting an auto loan.

1. Your Credit Score Matters

One of the factors considered by lenders when getting an auto loan is the credit score. Whether you are using a bank, an auto loan dealer, or a private lender, you have to make sure your credit rating is in good shape. Each lender usually has a different way of looking at your credit score. Make sure that before you visit any of these car finance lenders, your credit score meets the minimum requirement.

2. Know the Total Cost

In most cases when buying a car, we are more concerned about the price, make, model. Others will go ahead and look at the year of manufacture as well as the mileage. As far as car financing is concerned, it pays to shop around for some of the most affordable car brands in Kenya or your country of residence. This will help you estimate a budget you can work with depending on your needs and capabilities.

Also, it is crucial to calculate the cost of a loan before making an application. This helps check your financial capability to make sure you can pay the monthly installments effectively. Therefore, look at the rates that your lender is offering you and the time required to repay it.

Calculate the total cost and then decide if you want to continue with the loan or not. Whether it’s a new ride or you are buying a used car, getting the car loan requires that you have a certain amount for down-payment. Check how much your car dealer wants as a down payment and then you will be able to calculate the total cost when getting you an auto loan.

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3. Consider the Length of the Loan

Loans come with different payment terms. One of these terms is the time required to pay the loan. Low monthly payments are usually very enticing. However, the longer you take to repay the loan, the more the interest you are likely to pay. Where possible, go for a loan with a lower repayment length, and whose monthly installments are pocket friendly to you.

4. Know What You Can Afford

Getting a car is a good thing. However, you should always ensure you get one that you can afford. This is both in terms of paying back the loan as well as the maintenance expenses. This also means considering the accessories that may be required after your purchase to upgrade or maintain your car. This way, you won’t end up drowning in debt just to own your dream car.

Before deciding to get an auto loan, do the math, and determine if you can afford it. Getting your car repossessed and your credit score damaged are the last things you want. Look for lenders that have favorable offers and make sure you can afford the car’s upkeep before deciding to get it.