Planning to buy a new car is a big step in everyone’s life. This decision can make your life more comfortable and can also offer you opportunities to travel. This is a positive decision- however, we all know that most of us cannot afford the most expensive top-of-the-line car, given the amount required for the down payment, much less have the ability to afford the entire car.
This is precisely where motor financing comes in. As there are multiple financial institutions offering different types of motor loans, opting for one is obviously a sensible choice. Obviously, the most important factor to be considered before you choose a car loan is your budget.
Determine the Budget
When you think about the budget, you need to take into account both the cost of the car and the other factors which add up to your expenses. These include:
- The maintenance of the car in the long run
- Fuel Consumption
- A comprehensive vehicle insurance
- Security, which is smash-and-grab protection and tracking device
- Possible increases of the interest rates
Though the budget is the most important factor to be considered for an auto loan, there are more factors which play an important role in the required loan.
1. Debt to Income ratio
The amount of money you earn is compared to the amount of money you owe to other debtors. This is considered by the lender as it clearly indicates your ability to make the payments on time. In case you have a substantial debt, there is a possibility that even a high income might not make you eligible for a car loan.
2. The Credit Score
Make sure you have a good credit score, as the lenders could go through your credit report before approving a specific loan. This report offers a clear picture of your closed and current credit accounts along with the history of the payments and the time you have been using the credit.
3. The Age of the Vehicle
You need to be aware that a new vehicle can be convenient as this attracts lower rates of interest because the lender can repossess it in case of a default. This new vehicle tends to have a higher resale value compared to a used one.
4. The Downpayment and the Size of the Loan
You can look forward to favorable loan conditions offered by a substantial enough downpayment on a more convenient loan.
5. The Time Frame of the Loan
You might have observed that the lenders offer loans to those who seem to be a ‘safe’ bet. In case you are able to pay off the loan early with high payments, you can think of getting loans in favorable conditions.
Reasons for opting for Motor Finance
The option of car finances is a real blessing for most of us, as this tends to help us keep our savings where it belongs, namely the bank. In addition to this, a car loan allows you to consider buying a more expensive car. This wouldn’t be possible if you plan on funding the total expenses from your own money in one go.
Paying the car in instalments means you won’t feel an immediate burden on your finances. Budgeting becomes easier when you have a clear idea of how long you will be paying and how much.
Another reason for opting for motor finance is that it’s more likely to obtain compared to the standard bank loans. Most of the lenders offering these loans give different types of perks, which are always beneficial to most of us.
Ensure that you search for a well-reputed motor finance institution before you apply for this loan.