4 Costly Mistakes to Avoid When Taking a Car Loan

Any mistake you make when taking a car loan could translate into thousands of dollars. Caution, on the other hand, could see you save considerably. When financing your vehicle, there are plenty of other considerations besides the price. These tips will help you learn some of the grave mistakes people make when taking a car loan and how to avoid them. 

Negotiating Monthly Payment

Trying to negotiate the monthly payment with the dealer is not outrageous. However, it is not shrewd either. When taking a car loan, you should emphasise on the bigger picture, the purchase price. It is recommended that you know how much you can afford to pay on a monthly basis but disclosing this figure to the dealer denies you some leverage; you may forfeit your ability to negotiate for a lesser purchase price.

Failing To Do Your Homework

Before you can consider a car loan, you should do some research to avoid making an uninformed decision. Some of the things you should cover include:

•    Knowing your credit score- failure to check your credit score in advance puts you at the mercy of the dealership. Someone with a higher credit score than yours will pay a lower rate on the car loan. Therefore, ensure that you know your credit score before setting foot in the dealership or they will define it for you.

•    Research your car- is the car you are about to finance at par with your requirements and budget? You cannot afford to take a car loan on impulse.

•    Consider several car loans- Visit several institutions and listen to what they have to offer before you can settle for a car loan.

Financing Add-ons

Rule of thumb; financing add-ons is a NO. A dealership will offer you products like extended warranty, fabric protection, credit life insurance and undercoating among others. While you may still require these things, you will end up paying more which is unnecessary. 

Not using a Loan Calculator

Knowledge is leverage. Before you can take a car loan, you should have a clear understanding of your borrowing capacity. Failure to that, you may end up taking a second-rate loan. This calculator will allow you to explore different payment scenarios by playing around with the loan terms, interest rates, borrowing amounts and even repayment schedules.

A car loan is not supposed to plunge you into an abyss of debt. Take your time and seek advice if possible before making this financial commitment.