Buying a car isn’t exactly a one-step process. Unless you have enough in your savings to purchase a car cash or you have parents who are willing to help, you will most likely have to apply for a car loan to help finance the car of your dreams.
Luckily, getting a car loan nowadays is a rather easy undertaking. With careful guidance, you could effectively negotiate the right terms that will fit your needs and your circumstances. To help you get started, here is a step-by-step guide to getting a car loan that will suit you.
Step 1: Establish a budget
The first thing you need to work out is your budget. You must take a good look at your overall financial situation and establish just how much you can afford in repayments each month. A realistic budget will help you determine what you can and cannot afford.
Moreover you need to look at your savings. How much do you have in your savings account, and how much would you need to take out via the loan to get the car you want? How big is the gap between? Do you have enough money saved for the down payment?
Also read: How to Budget to Allow for Repayments
Step 2: Look at your credit score
Your credit standing is a big determiner of whether or not you’ll be approved for a car loan. Having a good credit score tells banks and other financial institutes that you can be trusted to make your repayments in time. Having a bad credit score will do the opposite. However, having bad credit doesn’t necessarily mean you will get rejected on a loan application, but you may end up with a bigger down payment or higher interest rates.
If this is the first time you apply for a loan, it may limit your chances since you don’t have a reliable credit history to back you up.
Step 3: Shop around and do your research
Preparing for a car loan application should entail effective research. Before applying for a loan, there are many things that you should carefully consider such as the price range of the car you wish to get, the amount you can borrow, how much the repayments could be, the loan term, and other important matters such as insurance and regular maintenance.
You should also determine if you wish to buy a new car or a used one. Shopping around and comparing car loans based on the current markets would provide you with great insight. You must get acquainted with the different features that car loans may have like interest rates, fees (application fees, monthly fees, taxes, etc), type of loans, loan term, and the type of lender you will borrow money from.
Step 4: Get pre-approval
A pre-approval for a loan is when a lender (either a bank, dealership, non-bank lenders, or car manufacturers) confirms your eligibility to loan a specific amount of money while giving you the option to back out if you are to change your mind.
While pre-approval does not guarantee an approval of your application, since it requires lenders to assess your financial situation, it provides a good indication of whether you get approved or not. More than that, pre-approval will help you get an idea as to how much you can afford when it comes to buying a car.
Step 5: Apply and get approved
If you think you’ve done all you can to prepare for the application, it’s time for you to finally apply for a car loan (and hopefully get approved!). Remember, the vehicle you desire to buy must be qualified for the car loan you wish to apply for.
While different financial institutes may have their specific document requirements they want you to prepare, it will most likely include the following:
- Personal information and proof of identification such as a drivers’ license or passport.
- Proof of income that may include your recent payslips, your tax returns, and other documents that indicate how much you are making.
- Proof of assets and liabilities which can include your credit card statements or details of your mortgage or other loans that you currently or previously had.
- Documents regarding important information on the car you are planning to buy including the contract of sale, the car registration, and insurance.
After filling out an application form, your papers will then be reviewed by a credit officer. Afterward, they will ask you to submit the necessary documents. Once all of this is done, all you need to do is wait for your application to be approved (this might be the hardest part).
Word of caution
Getting a car loan, or any loan for that matter, also serves as a test of integrity. Here, most people’s reliability will be tested and this will reflect on your credit history. While one late payment may not be reflected on your credit history, recurring late payments will.
If you want to avoid falling into debt, you have to make sure you can afford the car your wish to buy and the monthly repayments that come with it. Using a car loan payment calculator before filing your application should be of great help.
Get Your Car Loan with Aussie
Knowing this step-by-step guide, getting a car loan that suits you is as easy as 1-2-3. If you’re looking to purchase a new vehicle near Sydney, Melbourne, or Brisbane, you can call Aussie Car Loans.
Knowing how to budget will help you afford a car loan and manage the monthly repayments easily. It will also help a lot to find a car loan with a low-interest rate to ensure that it fits your finances. Aussie Car Loans can help you with that. We have a wide range of car finance products with competitive fixed rates and flexible loan terms to fit your needs.