Tips and Strategies for First Time Car Loan Borrowers
Like most things in life you attempt the first time, there’s a tendency to get things wrong. Naturally, car loan are no different but the important thing here is to be aware that getting it wrong can be costly. Your margin for error as a first time buyer is therefore very narrow and so the steps necessary to prevent mistakes must be taken. This article will guide you on preventing those mistakes. After reading you’ll graduate from being a first time car loan borrower to someone well informed about the loan process and how to navigate the financial maze.
The first thing you should consider is the type of car you choose to buy. If you are young and hip, you will probably be considering buying something ‘fast’ and perhaps expensive. This is usually the wrong approach and here’s why: fast expensive cars are considered ‘risky’; they are very expensive to insure and so most lenders will be reluctant to finance such a purchase for someone unproven where borrowing is concerned. Now, I am not recommending that you get a broken down car, I am instead suggesting that you strike a balance when looking at the car. Something that is moderately priced and that is not known for being a magnet for thieves is usually the recommendation.
Your second consideration should be the ‘confidence’ that you are able to present to the lender. In this context, confidence is really you demonstrating an ability to repay. This is very important because if a lender feels the slightest that you are unable to service the loan they won’t advance the money to you. So how do you do this? It’s simple and involves just gathering the documentation that will prove that you are employed or have some source of reliable income. In this regard, pay stubs and an employment letter will usually suffice. If your bank account has a lot of activity and is in good standing, it’s usually a good idea to present a few bank statements as well.
Next up is your credit score, and don’t panic, a bad credit score won’t prevent you from borrowing. What you must do at a minimum is have an idea of your credit score. You needn’t get a full report, just the basic one detailing your ranking. This ranking should inform heavily your approach to each lender and more importantly the type of lender you approach. If your score is very bad, then you want to approach those lenders that are predisposed to lending to people with bad credit. If it’s a decent score then you have more flexibility around who you approach, but lending source will affect interest rates so this must also be considered.
Lending source therefore, is your final consideration for borrowing and getting the best rates as a first time borrower. The thing you’ll want to do is approach online lenders—nothing else needs to be considered really. Online lenders are cheaper, have faster approval processes and you can do the kind of shopping around necessary when making big decisions like auto financing. You also get a lot of help online in choosing a lender and customer support forums and chat rooms abound. Let’s say you identify company X as a potential lender, one search online for ‘company X scam’ will yield a wealth of information on whether that company has been good for previous borrowers and what problems if any, they encountered.
The above might seem like an epistle but believe me its important that you observe every word. Not doing so could cost you thousands of dollars and even ruin your credit history long before you get going. For more tips check out this video:
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