Car Loan Application Tips

The car loan application process seems straightforward since there are numerous lenders on the market. However, you must be cautious since slight oversights could prove expensive in the long run. Continue reading this article for some valuable car loan application tips and tricks. 

Narrow Down To A Specific Vehicle

Start by settling on a specific vehicle. It will help you determine the loan you need. You must be strategic when choosing a car. Remember, you will spend several years repaying the bank loan. Therefore, the car you buy must be able to serve your needs. Additionally, it should not be prone to breakdowns. Conduct some due diligence to determine the performance and durability of the various models on sale. Besides, examine the depreciation rate of the car. The thumb rule is to go for models with a slow depreciation rate. This way, you can sell the vehicle for a reasonable price if you do not need it in the future. 

Understand The Eligibility Criteria

Most lenders have an easy eligibility criterion. Typically, they need you to have an excellent credit score. The lenders also examine your debt to income ratio to establish if you can comfortably repay the loan and cater to your basic needs. In some cases, lenders will only finance vehicles manufactured within a specified period. It is especially so if you intend to use the car as collateral for your loan. 

Compare Bank Finance Versus Dealer Finance

You have two options when taking out a car loan. You could either visit conventional lenders or opt for dealer finance. Start by examining the interest rates and extra charges in each loan product. Then check the ease of application. In most cases, dealer financing is a bit easier than bank car loans. However, dealers might have strict eligibility criteria and higher interest rates. 

Banks also have a wide range of car loans. For example, the bank could offer a green car loan when buying electric or hybrid cars. These loans have a lower interest rate to encourage buyers to buy eco-friendly vehicles. If your home has some equity, you could opt for a mortgage redraw car loan. The benefit of this product is that the car is not tied to the loan. You make your regular mortgage repayments and enjoy the benefits of car ownership. Businesses could opt for an operating lease, commercial hire purchase or finance lease. 

Negotiate The Loan 

Most borrowers are not aware that banks allow them to negotiate the loan repayment terms. For instance, you could ask the bank to allow you to place a lower deposit. If you have a long working relationship with the bank, you could bargain for lower interest rates. 

When taking out a car loan from a local service, settle on a specified car, understand the eligibility criteria, compare bank and dealer finance and negotiate the loan.