Car financing doesn’t have to be complicated. Once you understand the basics of finance, you can better choose the most suitable financing option for you to buy a car. Buying a car is one of the biggest purchases that most people make, and second, buying a home. Deciding how to finance a car is important and probably expensive. You have to decide whether you want to use a personal loan or a car loan. Do you want to go with the credit union, commercial band, or the dealer.
Once you have decided to get a car loan the most important thing is to evaluate how much you can afford because it is a huge commitment that you have to repay over a determined time. Which means you can afford to repay the monthly payments of car loan as well as other expenses associated with the car such as maintenance cost and fueling. This makes you consider your income and then set the percentage of financing you can afford. There are so many options in the market when looking for a car loan.
Once you have made up your mind to get the right finance there are some things you should understand before making the final decision such as;
Amount to be financed
Depending on the type of car you are planning to buy such as a new car or used car, imported car or locally manufactured car this is the total amount the bank will offer you to buy a car. Every bank offers the car loan on different terms or we can say every bank has its terms and conditions. So it is important to remember the terms because it makes ease in the selection of best options provided by the different banks. Most banks pay up to 70 to 90 percent of the total amount of Car.
The rate of interest on the loan
The interest rate is the amount that is different from the car loan amount and is added to it. Rate of interest is charged on the amount of loan throughout the time duration of loan sometimes known as service charges or markup. The interest rate can be fixed or variable depending on the market. So while selecting the loan it is important to consider the rate of interest you can afford to pay because it depends on the circumstances of the individual who has to pay.
Insurance is compulsory for the car which is financed from the bank. Insurance cost depends on the model and makes the car normally the cost range is from 2 to 5 percent per annum. This is based on the selection of your insurance options, for example, you like to install tracker or mobility notifications, etc. Insurance payments depend on the company’s policy.
The time duration of the loan
This is the time taken from the bank to repay the amount of loan and amount of interest respectively. Normally banks offer a 3 to 7 years plan and interest is charged over the duration of time.
Comparing the car finance companies to get the best deal
Banks will offer many plans to make you their customer but you have to find the best option per your affordability. There are different websites and other financial institutes to help you find the best option for you.