How Should I Prepare for a Car Loan Application?
If you want to get car finance to cover the cost of your new vehicle, you first need to apply. Good preparation gives you a higher chance of getting approved by the car finance company. You will also be able to avoid the common mistakes that car buyers make when applying for car finance.
In this guide, we've got everything you need to know about preparing for a car loan application. So read on and get ready to buy your new set of wheels! 👆
1. Save Money for Your Deposit
The higher your deposit, the less you'll need to borrow to fund the car. Monthly payments are also lower when the deposit is higher. So, before you apply for finance on a car, think about how much you'd like to contribute towards the deposit.
If you don't have the cash available, set aside some money each month consistently, and you’ll end up with a significant amount to put towards the deposit on the car.
2. Check Your Credit Report
Lenders evaluate your application for finance by checking your credit report and score. So, it's wise to check your report to see your financial history and your credit score before applying. The score or rating matters because it represents how good you are when it comes to paying your debts and bills on time, and generally managing money.
Checking your credit report will also give you the opportunity to assess if there are any errors in the personal information in your records, such as your name and address. Errors and incorrect or outdated information can affect your score negatively which, in turn, impacts the car finance application. Also, review your transactions to see if they’re correct. It’s a way to determine if there are any suspicious or fraudulent activities on your account.
3. Know How Much You Can Afford
You need to how much you can afford for the repayments each month. If you already have the funds for the deposit, then this is great because it means you will pay less interest on the amount you need to borrow.
Remember, you will be borrowing money over a long period of time. You may receive big offers from lenders too, enabling you to buy a more expensive car. However, it's important not to get carried away - know your budget and stick to it!
4. Take Your Time When Choosing a Car
There are so many options to choose from when shopping for a car. You can buy from a car dealership both offline and online. You can also apply for car finance online in the UK now, so this means you can now buy a car entirely online, and get it delivered to your door. When it comes to choosing the type of car you should buy, an important question to ask yourself is, do you want a brand-new car, or is a used model more appealing? The choice depends on your budget, needs and personal preferences.
Take as much time as you need and make a shortlist. If you want, you could make a pros and cons table too, helping you determine if a particular car is a good choice. For example, you may like one model, but it’s too expensive, so it’s not a very practical option. You therefore may opt for something more affordable.
By doing it in a systematic way, it will be much easier for you to weigh up your decision. You may also ask for advice from your family or significant other. Talk to your friends who also have cars so they can share tips on how to choose the right vehicle for you. A second opinion is always good when it comes to big decisions.
5. Ask for Finance Quotes
Compare different lenders, but don’t apply to every one that you come across. That would be bad news for your credit score! Do your homework and check out the interest rates of different lenders, listing the ones with the lowest rates and fees before you apply.
Once you have a shortlist, spend time researching the lenders and their car finance deals so that you’ll have an idea of what they can offer. When you’re ready, you can contact them and ask about their services. A good way to compare lenders is by looking at their APR rate, which will include any charges etc, and is calculated in the same way by every company. Also, look at the total amount you will repay over time, not just the monthly figure.
Don’t forget to use the car finance calculators that are usually available on the lenders’ websites. This is another way of getting an estimate of your monthly repayment amount.
6. Don't Hesitate to Ask Questions
When you’re reading about different car finance agreements, you may come across technical terms that you’re not sure you understand. You can always contact the car finance company’s representative to ask them any questions you may have.
Don’t be afraid of doing this, as most people find finance terminology a nightmare and need a little help. It’s important that you understand everything about the car finance deal and the terms and conditions before you sign the agreement. Lenders will be more than willing to help you out, so go ahead and reach out to them if you need to.
The preparation you make when applying for a car loan is crucial because it will have an impact on the success of your application. Once you have decided on the lender you wish to use, all you need to do is get together all your documentation and ID, ready to make your application.
Keep in mind that your credit score and history also play an important role in the success of your application. So, check out your score first and assess whether your credit rating is likely to be good enough to secure car financing. A low score may be rejected, or you may get offers but at high-interest rates. If you have a poor credit score, think about waiting a bit before applying for finance and set about improving your score first👍
If you have any questions about the car loan application, contact Carmoola today. Our friendly car finance experts will be happy to answer your questions and help you navigate the application process.