Revving engines, sleek designs, and open roads—there’s nothing quite like the feeling of owning a new car. But to ensure a smooth ride toward your dream car, you may have to jump over the obstacles that can hinder your auto loan experience.
In this blog, we share ten common mistakes everyone should avoid while applying for an auto loan.
So, drop your worries, buckle up, and read on.
1. Neglecting your credit score
Your credit score plays an important role in deciding whether you qualify for an auto loan or not. Plus, a good credit score can secure you a lucrative auto loan with a low-interest rate. However, to avail of that, your credit score should be healthy.
So, before you start applying for auto loans, make sure to check your credit score and ensure it’s healthy enough. If this isn’t the case, you may want to consider working on your credit score and stalling the current plans for a few months.
2. Skipping loan research
Jumping into an auto loan without proper research can lead to costly consequences. It is critical to compare interest rates, loan terms, and repayment options from different lenders to find the most favorable terms and ensure you get the best deal.
3. Overlooking pre-approval
Overlooking the pre-approval process is like hitting the road without a GPS. Pre-approval helps you understand your budget, simplifies the car-buying process, and gives you the power to negotiate better.
4. Not checking the total costs
Beyond the sticker price, various other associated costs may add up to the final price.
These costs mostly include road tax and insurance. While these two are important and should be paid for, you should be aware of the amount you are paying and must compare it with the market price before making the final payment.
Also, while taking an auto loan, make sure to check for prepayment options and any charges that may apply during early foreclosure.
5. Ignoring the loan term
Opting for a longer loan term might seem tempting with its lower monthly payments. However, longer terms make you pay more interest rates, increasing the overall cost of the car.
For best results, it’s advisable to maintain a balance between affordable monthly payments and reasonable loan tenure.
6. Saving too little or nothing for the down payment
A huge down payment can significantly reduce the loan amount and lower your monthly payments. So, it’s always better to save up for a down payment and contribute as largely as possible to the first payment of your car.
7. Accepting the first loan offer
If you want to get the best interest rate on auto loans, don’t make the mistake of accepting the very first loan offer you receive.
Before you sign up for any home loan from any credit union or traditional bank, make sure to explore your options and pick the lender offering a loan for the lowest interest rate and the best features.
8. Overextending your budget
Here’s a short story:
“You looked at your favorite car; You liked its base model. You agreed to go for it.
But then, your friend started encouraging you to get the top model that costs 30% more, and now you are fencing again.”
While that little extra push may not seem too much in the beginning, while repaying the loan, it may add years to the tenure.
So, to keep yourself safe from such challenges, you may want to stay within a pre-decided budget.
Wrapping up
Getting an auto loan can be exciting, and it can be challenging. In this blog, we shared a few tips to make it less challenging and more secure for our readers.
