So, you’ve started going on a few test drives and your dream car is a little over your budget? Perhaps you need a car immediately so that you can accept a job opportunity, maybe you don’t want to pay outright for a car because of an investment opportunity. Whatever the reason, being well researched pays in dividends.
It’s important to know how much a new or old car costs so you know if you’re getting the best deal. Buying a car can be one of our most expensive assets and a car loan can be a hassle if you don’t put in the right research before financing it.
Taking out the right car loan can mean that you keep your credit score healthy, especially if it has been in bad health in the past. For those with bad credit, car loans might set you on your path to a favourable history so you can build your health back up.
Here’s our guide on 5 things to consider before taking out a car loan.
1. Check the health of your credit
Lenders will generally lend a higher amount to those with a healthier score. If you know your credit score, you’ll be able to figure out what kind of loan you can qualify for. A car loan, like many other loans, will affect your credit score. Remember that every time you apply for a loan, the lender is obligated to add it to your credit report. This means that if you submit multiple applications at the same time in a short period of time, your credit can change. Applying for multiple loans suggests to lenders that you might have difficulty paying back the loan.
If you have bad credit, you might find it difficult to get approval for a car loan in Australia. If you’re in this situation, it is best to compare and do your own research before applying. Try and minimise the chance of your loan being rejected by looking into the criteria for eligibility and make sure you can meet the minimum requirements.
2. Find a car loan with a short term
Car loans can be a long-term investment and you will be responsible for paying the whole loan, even if you decide to sell the car after a few years. You might think that spreading out the payments will be easier to manage, however you will have to pay a lot more in the long run. For example, a seven-year loan will be subject to more interest than a 3-year loan. You
will have a higher repayment amount with a shorter loan, but overall, the saving in interest is worth it.
3. Check the interest rate
A dealer finance might seem like it is more convenient, however be careful of the mark up that the dealer might add on to add to their profit. Make sure to check your interest rate and the total amount you’ll pay. By the time you calculate the total amount including interest, it may be a lot more than you budgeted for. The lower the interest rate is, the better. A financial expert can help you weight up all your options.
4. Put a large deposit down
Similar to a house, you should put a large deposit down for your car. If you aim to pay 20% up front, then you will have lower repayments and pay less interest over time.
H2: 5. Budget well and only pay what you can afford
Not only should you ensure that you can afford the monthly repayments, but you should also be able to maintain your living expenses. You need to make sure that you can meet the monthly repayments because missing your payments may make your credit worse. Not only can your car be repossessed, but your credit score can take a hit as well.
5. Budget well and only pay what you can afford
Not only should you ensure that you can afford the monthly repayments, but you should also be able to maintain your living expenses. You need to make sure that you can meet the monthly repayments because missing your payments may make your credit worse. Not only can your car be repossessed, but your credit score can take a hit as well.
Find the right road with Debt Fix
As long as you are in it for the long drive, Debt Fix is here to help everyday Australians overcome their bad credit. At Debt Fix, we will be able to help you apply for a bad credit car loan in Australia. Our knowledgeable team is here to help you find a car loan that is right for you. We believe that bad credit shouldn’t get in the way of your goals and something that you need to research alone. If you have bad credit and are looking to take out a car loan in Australia, we might be able to help. For more information, contact our consultants today.