8 Things You Should Never Do Before Applying for a Car Loan

Most people consider taking out loans to purchase a car. However, not everyone understands what should NOT be done before making an application for a loan. This article discusses various points to examine and things to avoid doing before applying for a car loan. This is to help make informed and clear decisions and know some basic info about car loans. Continue reading for more information.

Never Choose a Wrong Deal

On some occasions, you might be forced to choose between a low-interest car loan and a cash rebate. Note that the choice you make has both long-term and short-term impacts. It would help if you were well-informed about the deal you will choose to avoid complexities in the future.

Do Not Take a Loan if You Don’t Have To

Taking car loans is not a problem, but you will feel its weight on your budget during repayments. If you have enough savings to afford a car without impacting your ability to handle emergencies or unforeseen expenses, you don’t have to go for a car loan. It will also help you in terms of financial stability.

Including the Add-Ons on the Loan Amount

When you plan to acquire easy car loans, only go for an amount that is enough to acquire your dream car, this means you should never include unnecessary add-ons on loan to reduce the interest and the total amount to be paid for the loan.

Going to a Single Lender

There are numerous lenders available who offer car loans. It would help if you kept multiple lenders in mind for your car loan needs. To get a good car loan deal, always visit several lenders before making the final decision and the best loan for you. This will help you to strike the best deal in town by getting a loan with good interest. However, be aware of the impact of multiple credit enquiries on your credit score: shop around and do some research, but don’t make too many applications unless you’re serious. 

Going for a Loan that is Too Long

When you focus all your concerns on the monthly repayment rather than the price of the car, you will end up having an extremely long loan to pay. You might find yourself having a loan to repay within eight years. Over eight years, you will accrue more interest than over a five-year loan – consider the benefits of paying more monthly to reduce your total amount paid or adjust your car price budget to suit a more comfortable repayment amount. 

Going Car Shopping Without a Preapproved Financing

This is common among many people who intend to acquire a car loan. Note that having preapproved financing before you go shopping serves as an added advantage. It greatly helps negotiate the financial terms with the seller, allowing you to get quality offers. You will always have a benchmark to operate within, thus placing you on the safe side.

Avoid Cosigning a Loan for Anyone

Many people tend to cosign loans to friends and family. This is likely to affect your loan and transaction history. To be on the safe side, you should never accept to cosign a loan to anyone if you’re also planning to apply for credit. This will help you maintain a clean record that will increase the chances of qualifying for a car loan. Note that sometimes you might be forced to repay the loan you cosigned as you are equally responsible for it to count towards your overall debt capacity in your application assessment. 

Avoid Changing Jobs Frequently

The job you do determines your income streams. The car you intend to acquire mainly depends on the amount of money you earn after a certain stipulated period. Changing jobs will affect your credit and transaction history, which is relevant for the loan amount you qualify for. It also helps to create trust with the lending unions.

Conclusion

Understanding what to do and what not to do is relevant for your car loan needs. The points discussed above are things that you should never attempt doing before applying for a car loan.

About the Author:

Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.