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10 Dangers of Getting a Car Loan You Should Avoid

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Car Financing

A car loan can help you pay for the car of your dreams. However, there are many dangers associated with getting a car. You will need to be aware of the following car financing mistakes and take the steps that are necessary to avoid them.

1.) Only Thinking About the Car That You Want

Many people fall in love with a particular car. That is why car finance in Perth is the last thing that they think about. The car of your dreams may not be within your budget. Before you shop for a car, you will need to review your budget.

2.) Shopping for a Car Without Getting Pre-Approved for Financing

You can get a car loan without getting pre-approved first. However, it is not a good idea for you to do this. If you have a pre-approval, then the lender will feel more confident giving you a loan. A pre-approval shows that you have met the minimum requirements to get a loan.

3.) Only Thinking About the Monthly Payment

You need to have a monthly payment that fits into your budget. However, the monthly payment that you want to take into consideration. Many sales people know how to manipulate the numbers so that they can get the payment as low as possible. They can give you a longer term, but you will end up paying more in interest in the long-term.

4.) Making The Terms of the Loan Too Long

The term of your loan should be six years or less. Lenders are encouraging people to take out a loan for seven or eight years just to get them to pay more in interest. A longer loan term comes with higher interest rates because it is more of a risk to the lender. Those extra payments can cause you to have to spend thousands of dollars unnecessarily.

5.) Not Shopping Around

You should not just settle for the first dealer that you talk to. Shopping around will allow you to compare rates. You will also be able to get a better deal if you shop around. Keep in mind that banks are not the only places that can give you a car loan. You can get one from a credit union, online dealer and financing company.

6.) Not Making A Down Payment

You will be able to get a much better deal on your car loan if you make a nice down payment. It is less risky for the lender if you make a down payment before you buy the car. This will also allow you to get a loan with a better interest rate.

7.) Applying for a Loan Without Knowing Your Credit Score

It is not a good idea to apply for any loan without knowing your credit score. If you don’t know your credit score, then you won’t know how much you can get approved for. You will have more buying power if you know your credit score beforehand.

If your credit score is not high as it should be, then you should work on it prior to applying for an auto loan. Pay off any past-due debts. Make sure that you pay all of your bills on time. Additionally, you should try to pay down your debt.

8.) Not Reading the Fine Print

Many people are so excited to get a car loan that they forget to read the fine print. You may end up missing a lot of the important details.

9.) Taking Out a Loan When You Don’t Have to

Before you take out a car loan, you should think about whether you really need one. If you have a sufficient amount of savings, then you should not take out a loan. Paying cash for a car can help you save a lot of money in the long run. You won’t have to worry about paying an excess amount of interest.

10.) Getting a Bad Deal

You have to be able to recognize a bad deal and walk away from it. Failing to do this can cost you a lot in the long run. You don’t have to give the dealer a reason to walk away. If your gut is telling you it’s a bad deal, then you shouldn’t take it.

By: Raymond James

About the Author:

Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals

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