Let’s assume that we chose our dream car. The first decision we have to make is how to finance it. Of course, the easiest method is to look into your own savings and pay a certain amount. However, not everyone can count on it, which means that these funds will have to be borrowed. Again, the easiest solution will be to take out a small cash loan or … overdraft. However, if this is not enough, you will need to take out a car loan.
Why should it be used only after other financing methods have fallen off? For a simple reason: in the case of “cars”, the bank takes over our ownership as much as the vehicle purchased. This is not a convenient solution for the borrower, but otherwise fair – it was the bank that financed its purchase.
Taking a car loan – step by step
So how to securely take a car loan that is beneficial to us? It is best to divide the entire procedure into several stages (steps) that will be necessary in the context of choosing the optimal offer.
Step 1: compare offers
Car loan offers should be compared not only on the basis of advertising outlines, but also on loan simulations and calculators. Such a comparison gives the most realistic results unless of course it is done using updated tools, including web applications. Let’s not forget that under the new regulations, in the case of loans up to $ 80,000, the bank must present the sum of the costs included in the APRC.
Step 2: analyzing loan parameters
Another important step is to check the parameters of the car loan. I am talking here in particular about the own contribution and the maximum value of financing the purchase of a car. It is also important whether the bank will also finance additional insurance, service costs, etc. Then check how the loan is secured. The most advantageous solution is the assignment of rights from insurance, although it also happens that the bank may take us e.g. a vehicle card, thus preventing us from resale.
Step 3: analysis of the procedure
It is worth checking whether a given bank will allow us to obtain funds based on a simplified loan granting procedure. It is a beneficial solution for borrowers without a credit history as well as for those who start their business activity. You should also read the terms of this solution.
Step 4: cost monitoring
Before we sign a contract, we should carefully analyze all its cost components. It may happen that, although the interest rate on the loan itself is relatively low, its additional costs (insurance, commissions, etc.) can significantly increase its cost. The question is whether, as a result of this increase, the total cost of the car loan will not be higher than in the case of a traditional commitment.
Step 5: sign the contract and pay the debt
Once all aspects of our car loan have been carefully thought out, it is time to sign the contract. Let’s do it with our head! Using loan offers that will be granted to us in just a few dozen minutes does not make it easier to make a wise decision as to the choice of a specific offer.
To sum up, car loans should be taken out wisely and – equally important – taking into account the rules and customs introduced by banks. Underestimating them may lead to the signing of the contract, which – to put it mildly – will completely plunge our home budget.