We go through a full spectrum of emotions when making a big financial decision like buying a car so how should we prepare ourselves to get finance?
Applying for and getting finance approved can be an exhausting and financially draining roller coaster these days but there is some preparation that can make it easier and with more preparation and less stress there will be a new car waiting to pick up at the end.
1) Organise your finance first before you shop
Car expenses including finance and all the running costs are the second-largest expense in our household after we pay a mortgage?
It might be tempting to buy first and worry about the finance later, but that could cause big problems if the lender won’t give you as much money as you need, or if the loan application process drags on. The smart and stress-free thing to do is to tidy up any finance-related issues first and then go shopping.
2) Check your credit score and rating?
When was the last time you’ve done a credit check on your own personal credit file? Do you have a clean slate? No good hiding from it because the lenders first stop is there.
Not all lenders will give you the green light for a car loan if you have a history of poor credit. Others will agree to lend to you but may offer higher rates of interest for the privilege. So if you’re in the market for a loan, clear any outstanding bills and establish a savings pattern to help prove that you’ll be able to service a loan. Checking your credit score can also sometimes divulge debts that may not exist or you did not know about. We then get an opportunity to fix them before anyone else gets to see them. Its always hard to un-see something.
3) Know how much you can afford
Sit down and work out how much you can realistically afford each month – and then give yourself a buffer. Have a clear understanding of how much buying a car and maintaining a car will impact your take-home pay. In the same way that you’d shop around for the best price on a new car, shopping around for a great car loan can ultimately save you hundreds, if not thousands, of dollars. Conducting a financial comparison will save you time otherwise spent trawling providers’ websites and will likely save you money too.
4) Do you know which finance product will fit your needs?
There are many finance products out there when you are purchasing a car. First and foremost is to decide if you will be using this car for personal use purpose or business use purpose? Have you ever wondered why some car loans are cheaper than personal loans?
For personal use purpose there are options may fit your financial circumstances such as
• Consumer Car Loan
• Novated Lease or Salary Packaging
• Personal Loan ( Secured Lend or Unsecure Lend)
• Use your home equity
For business use purpose there are options may fit your financial circumstances such as
• Chattel Mortgage Loan
• Business Finance
• Cash Flow Lending
• Secured Lend or Unsecured Lend
5) Limit your applications
While you might be tempted to put in multiple applications for a car loan to ensure you get the best deal, doing so can impact your credit rating – particularly if you’re knocked back. Each time you make an enquiry, your personal credit file will leave a remark whether or not you have proceeded with the lender, your credit score will drop and more credit enquiries on your file will not be favourable for your interest rates you may get from a lender. Instead, find one great finance option and stick with it.
For more advice and a financial health check you can contact NEXT Finance on 1300 63 7283
By: Junies Lim
General Manager at NEXT Asset Finance
By: Junies Lim
General Manger at NEXT Asset Finance