Finding the right car loan isn’t only tricky business, it’s often outright frustrating. Car loan applicants need to ask a variety of questions if they’re to source and apply for a competitive car loan and as many have discovered firsthand, the lowest interest rate doesn’t always equate to the best loan.
The nature of loans has become increasingly complex over the years with the result that there are many low interest car loans available and so many terms, conditions, fees and charges to comprehend that many car loan applicants find themselves understandably confused.
Here are some questions that car loan applicants should ask when applying for a loan to purchase a car, and although the first few you might feel are superfluous and self-explanatory, think again.
What’s the interest rate?
This is important to understand and whilst some focus on the interest rate above everything else, others overlook it completely in favour of monthly repayments or the total cost of the loan. Bear in mind the variety of loan – fixed or variable – and other factors influence the interest rate and that rates often vary wildly.
Is the interest rate fixed or variable?
For most people a fixed interest rate is preferable to a variable interest rate because they know exactly how much their loan repayments are for the term of the loan and this makes budgeting for repayments easier.
What’s the term of the loan?
The term of the loan is the number of years or months that it takes to repay the loan. Many low interest car loans stipulate in the fine print that the loan term is for a very short period of time, in some cases only two or three years, which isn’t suitable for those who’d been hoping for lower repayments over a longer repayment term.
What are my loan term repayment options?
Some lenders enable applicants to choose the term of their loan whilst others don’t. If you’re looking for flexibility in this regard you’ll have to shop about but you’ll find that many lenders allow borrowers to choose the length of the loan term within reason.
What fees are applied and are they upfront or ongoing?
An establishment fee is an example of an upfront fee whilst an insurance fee is an example of an ongoing fee that will need to be budgeted for over the entire loan term. Fees can vary wildly and widely from lender to lender so it’s imperative that car loan applicants establish the fees that will be applied to the loan.
Can I make extra repayments or repay early without penalty?
Some lenders make this perfectly clear when promoting their loans whilst others don’t. These options – making extra repayments and repaying the loan early without penalty – can make a significant difference to the competitiveness of the loan and your finances, so look out for loans that offer this degree of flexibility.
What’s the total amount repaid?
The total amount repaid is the loan amount, the interest applied to the loan over the specified period and all the upfront and ongoing fees and charges applied. Most online lenders like Credit Noble provide online tools so that loan applicants can ascertain how much the total amount repaid will be.
Is comprehensive insurance compulsory?
This is another ‘fine print’ consideration that many car loan applicants forget to check for and one that can increase the cost of taking out a loan to buy a car. When buying a car with a loan the car is seen as security so many lenders insist upon the applicant taking out a comprehensive car insurance policy.
About the Author:
Credit Noble is a company in the UK that provides financial solutions to those who wish to buy a car or go to college. They also cater to those who cannot borrow from other places due to less than perfect credit ratings.