When you take out a car loan, which can be a three- to five year commitment you need to be ready to take on that kind of responsibility warned Wesbank in a statement this week. The car loan will be your responsibility, until the full amount owed to the bank is paid off.
So what should you be aware of before you take on a car loan? According to Wesbank, you should:
- Apply for a car loan that is within your budget and make provision for all the mobility costs (petrol, maintenance, comprehensive insurance and car washes).
- Make sure you saved enough to put down a big deposit. Such deposits give you room to negotiate and usually you can knock money off the purchase price. It also means you end up borrowing less from the bank, and you pay your car loan off sooner.
- Maintain a good credit history. Always pay your loans and bills on time. The bank looks into your credit history to make sure you are a good borrower.
- If you are looking at a used car, consider extending the warranty or service plan to ensure you are covered once the current plan expires.
Tip: Want to compare your car insurance with a competitive quote? Click here.
Wesbank also warned that you shouldn’t:
- Be tempted to go above your car-buying budget. Your loan has a higher chance of being rejected because the bank can see that you can’t afford the monthly car instalment.
- Be embarrassed about going for a cheaper or used car. A small car is the first step to one day owning your dream car.
- Apply for a car loan just after starting a new job. Rather wait for a couple of months, as this helps to increase your stability status. This counts in your favour when applying for your car loan.
- Increase the length of your car loan unless money gets tight. The quicker you pay back the loan the less you pay in interest.
To check if you can afford your car loan, Wesbank has a handy vehicle repayment and insurance calculator. Click here, to see if you would qualify for a loan and what your repayments are likely to be.