Smart Borrowing: Critical Steps When Applying for a Car Loan
There's nothing quite as freeing as roaming down an open highway, or even just having a car parked in the garage ready to take you on an adventure. If that's a dream of yours, you're not alone.
Outside of a house or apartment, a vehicle is likely to be one of the biggest purchases you make in your life, and one that's likely to require require you applying for a car loan. That's why it is important to be prepared. With this in mind, let's take a look at what steps you can do to get ready when applying for car finance.
Know what you can afford
We've all set our eyes upon one make of car or another and decided that it has to be ours. No matter what your taste, everyone has a dream car. But it's important not to let your passions get the better of you and enter into a financial agreement that will put you out significantly.
Stay within your means, and we're sure you will find the right car. Don't know what you can afford in terms of car finance? Then make sure to have a look at our handy car loan calculator. Simply punch in the numbers and it'll let you know your ballpark.
Plan ahead on the payments
While it might not be as significant as a mortgage, taking out new car finance is still a big commitment, and can have a term of up to seven years when you work with AAA Finance. Determining your payment plan allows you to know exactly how much you are spending on the costs ahead of time - no surprises down the line.
You can even minimise your payments for now and meet the remaining costs in a lump sum at the end of the term. This is a balloon payment, and is great for those who want to get on the road quickly and still have cash in their pocket, or those taking out a no or low doc car loan. The Australian Securities and Investments Commission's MoneySmart site notes that this is good for short term affordability - but make sure you can afford the lump sum.
Our panel of 23 lenders offers a wide range of vehicle finance options, no matter what your dream car may be. Take these simple steps to getting yourself prepared and then talk to one of our specialists. We could have you up and running within 24 hours!
What financial pitfalls catch people out?
There are a number of decisions people need to make before applying for a secured personal loan or other vehicle finance - and it's not just what you'll do with the money that needs to be considered.
As an experienced finance broker, we see people make a lot of mistakes when they're trying to secure finance, most of which are avoidable with a bit of extra know how. To ensure you're prepared to apply for a new car or boat loan, here's what you need to keep in mind.
Finance is not a one-size-fits-all solution
Where banks and some other institutions may assume that the same finance solution is right for everybody, AAA Finance is aware this isn't the case.
Because of this, we ensure that our clients receive a loan and repayments schedule that is tailored to fit their needs. Whether it's a business or personal loan, there's a way ensure it's the perfect fit for anyone who comes to us for help.
Only borrow what you need
Commonly, this is a pitfall AAA Finance sees younger borrowers fall into. While there is often the temptation to borrow a little extra to buy a flasher car or motorbike, it's usually better to borrow within your means.
After all, finance is meant to help. If you can't meet the repayments, you're harming your financial stability.
Don't redraw on your mortgage
On the other hand, this is a pitfall we often see older borrowers stumble across. The appeal to redrawing from a mortgage to secure funding for a car, boat or truck loan is that the interest rates are lower.
However, these are lower because the length of the time spent repaying these loans is so long. Because they're tied to a mortgage, this can be 20 years or more, meaning borrowers actually end up paying more once the loan is repaid.
To discover a loan solution that is right for you, call AAA Finance today.
About the author
Peter Watman has extensive finance and automotive experience having worked in both industries for over 30 years. Peter founded AAA Finance and Insurance in 2012. He leads an experienced team that provides quick and easy finance solutions along with exceptional customer service.