When it comes to getting a car loan, there are a few mistakes that you should avoid. Here are the top 4 car loan mistakes to avoid when looking for a new vehicle.
Getting the longest loan term possible
Loan terms tend to be between 1 and 7 years. Many people will try to take out the longest term they can, however, this is not always wise as you could end up paying extra interest over time by doing so. If the loan term is too long this could be bad for you as you could end up upside down on your car loan meaning you owe more on it than the vehicle is actually worth.
Additionally, although a longer loan term will make your monthly payments lower, you’ll also end up paying more overall for the loan because you’ll be paying interest and lender fees for more years.
A good way to avoid this mistake would be to find a loan term that works with your budget, and how often you plan on trading in your vehicle.
Not comparing all your loan options
When you look for a new vehicle, interest rates play a huge factor in what your payments will be. If you don’t take the time to research interest rates from multiple lenders, it could end up costing you more money in the long run due to higher monthly payments. A good way around this would be to speak with a financial lending specialist or someone who can provide you with personal car loan rates based on your credit and income.
When it comes to comparing loan options, or car loan refinancing check out Driva. You’ll be able to compare all of your loan options in one place and ensure that you’re getting the lowest possible rate.
Getting a car loan with someone else
Many people make the mistake of getting a car loan based on what their co-signer is able to qualify for. It should however be noted that if you don’t make your payments on time or default on your loan, it can affect both your and your co-signers credit score. When applying for a loan together, both of you should understand what the consequences are if the loan is not honoured.
Not checking your credit score
When you apply for a car loan, your credit score will play a factor in whether or not you are approved. If your credit score is low it means that you have fewer options to choose from when it comes to loan terms and interest rates. One way around this would be to check your credit report before applying for a new vehicle. You can do this is by requesting a free credit report online – you’ll be able to see exactly what your credit score is, and how it is broken down.
This way, when applying for a loan in future, you can be sure that you are getting the best rate possible with the lowest interest fees. Additionally, if there are any errors in your credit history, you’ll be able to get these fixed before applying for a loan.