Car Loans Step by Step

Necessary information about car loans

Step One: why I want to use a car loan?

Most of the time car loans are cheaper than credit cards. Also, it organises borrowers to pay their loan in a more extended time. Louder

Moreover, borrowers pay monthly, which mean they can plan their monthly expenses.

Step two: which lender

Car loans can be obtained from a wide variety of providers: banks, building societies, credit unions and other financial firms.

However, shopping around and comparing car loans before you start shopping around for the car is usually a good idea.

At each lender had different criteria, it means different clients can get different rates and answers from same bank base on their financial circumstances.

Step Three: The application process for a car loan

You will need to provide below information, to your possible lender when applying for a car loan.

      • Details about the car you are buying,
      • Proof of identity and
      • Your ability to make repayments

It indicates that you'll have to inform them about your

      • income,
      • assets,
      • liabilities (credit cards and any other loans you have) and
      • overall repayment ability.

Before you apply, you should also check your credit rating.

Lenders need to test whether what you say is true (there's a lot of deceptive people around nowadays!)

You may, therefore, need to include contact details of individuals and organisations that can check your records, such as

      • your employer,
      • accountant,
      • past financial lenders, or
      • landlord/property manager.

Then the lender will call these contacts to review your credit history to see if you are qualified for approval.

The amount of time it takes to get approval will rely on many factors, which is in the hand of lenders.

Step four: Pre-Approval

Loan pre-approval indicates securing approvals before choosing a car for a loan. Some people would like to know if they can get a car loan before they purchase the vehicle.

Also, it can be more challenging to search around for vehicles, get the

price, and apply for loans based on those figures.

Pre-approval would be valid only for a fixed period – It varies from bank to bank.

Step Five: Interest Rate

The interest rate varies considerably from one lender to another, and that is why you must first make comparisons between car loans to determine the most suitable offer.

Step Six: additional repayments

Car loans have a fixed schedule of payments. Although many car loans allow the borrower to make extra repayments to pay off the debt more quickly. Each dollar you pay more than the required repayment reduces the existence of your loan as well as the total cost, as you probably pay less interest.

Questions you must ask from your lender or your finance broker:

  • Ask about the Interest rate?
  • Should I pay an application fee?
  • Is there any ongoing administration fees?
  • Is there any exit fees?
  • How can I get pre-approcal?
  • Validity time of pre-approval?
  • Can I make an additional payment?
  • How much money can I pay in addition to my repayments?
  • Is there any penalty for paying off the loan quicker than usual?