Nine tips to get the best deal on a car loan

Buying a car can be a stressful experience. With so many options to choose from, it’s hard to know which one is the best for you. Fortunately, intensive research can eliminate stress and save you money in the long run.

When shopping for a car, it’s important to do your homework. Research the car you’re interested in and compare prices to find the best deal. If you are taking a car loan, research the loan provider to make sure they are reputable and have competitive rates. One wrong move can leave you owing money—and we don’t want that!

You don’t need to do this alone. The following 9 tips will help you get the best deal on a car loan without breaking your budget:

1. Check Your Credit

Nowadays most lending facilities have access to your credit history, which they use as a guide for determining how risky you are as a borrower.

From the reports they can tell if you consistently pay your loans on time. Additionally, they can tell if you are a chronic defaulter and have been black-listed by CRB (Credit Reference Bureau). Take a moment to find out how your rating has improved or deteriorated in recent months.

If your credit is less than perfect, you may want to consider putting some money down when purchasing a vehicle. If you have excellent credit, however, it's best to shop around for the best deal on a car loan.

You should check your credit reports carefully and make sure there are no errors. Confirm that you have no debts which have been paid off but not updated—such errors can cause problems for your credit rating. If necessary, contact a credit agency to correct any mistakes

2. Find Out Your Credit Score

Your credit report and your credit score are closely related, but not everything on your credit report may be reflected in your credit score. You may need to consult with other agencies that offer a credit score to see what it is.

Some of the factors that affect your credit score include things like how often you make your loan payments on time, how much money you owe to banks, and how many open loans you currently have.

Making errors on your credit report disappear can have the same effect as paying off your debts. Additionally, a good credit score will help you get the best loan rates.

3. Shop For Car Loans

In the same way that you're determined to get the best possible car deals, you should also be diligent about car financing. Make sure to shop around for rates/options before making a decision and do not settle for whatever the dealership suggests.

When looking for a lender, contact as many local banks, microfinance institutions, and direct lenders as you can. Ask about any fees they have and compare the different costs of each one with their interest rates

Make a list of all your different car loan options. Comparing quotations and terms like the interest rate, any hidden charges,  loan tenure, and added value, you will notice there are some differences to think through. Consider each offer carefully before deciding who to work with

4. Get Pre-Approved

Armed with all your car loan research, you should be able to approach lenders with some certainty and pre-approve your loan. This will allow them to lend you the money on agreed terms and even without the car being there. However, you will only be able to get the loan if you know what car you're going to buy.

With a pre-approved loan, you will be able to figure out exactly how much you'll owe and when. As well as when it's due and how often. This way, you have time to adjust your budget to accommodate the total price of what you're getting.

5. Put Down a Good Amount in Down Payment

A down payment is the percentage of the purchase price and helps to establish ownership as well as lowers risk for both parties. Typically it is 10% or 30%. It has two major advantages: firstly, you can avoid financing debt if you pay upfront, and secondly, it reduces your monthly repayments.

An increased down payment can lower the loan amount you pay as it doesn't have to go towards interest. It also reduces your risk for the bank as if you were to default on the loan, they get their money back by repossessing your car.

It might be hard to come up with a considerable amount of money as a deposit but in the long run, you will save a lot of money on loan interest.

6. Borrow Very Little

It's an excellent idea to make a bigger down payment if you want to reduce the amount of interest accrued. You'll also pay back your loan quicker this way.

One of the best ways to ensure you do not take out a big loan is to purchase an entry-level car. For your first job and you're looking for affordability, a good but entry-level car might be a good option. Not only will it save you money on the loan, but it will also keep expenses down when it comes to maintenance costs.

7. Choose a Short-Term Loan Option

It may be tempting to pay back a loan for a longer duration of time. However, the longer the time, the more interest you pay. Of course, paying back the loan for a longer period means that the monthly installments are less but you stand to lose more money in the long run.

Therefore just as it makes sense to borrow less, it is also advisable to pay it back in the shortest amount of time possible.

8. Allow the Car Dealer to Compete for Your Loan

With your pre-approved loan from an outside lender, you stand a chance to bargain for better terms at your dealership. You already have a baseline for the terms offered by the lender and they are well within your abilities to pay.

With this in mind, you can tell your dealer what the terms and conditions are and allow them to compete for your loan. You will be surprised that the dealer might offer even better terms thus saving you some money. Since a pre-approved loan does not mean you have to take it, if the dealer offers you a better deal, you can take that one instead.

9. Pay The Loan on Time

Once you're approved for a loan, make sure you make your monthly payments on time. Stay away from paying penalties for late payments by paying your monthly installment on time. Plus, a single late payment could have a huge impact on your credit score which is something you definitely want to avoid.

If your lender allows it, try to make early and voluntary payments if you can. In this way, you will reduce the loan amount by a significant margin and the duration of your loan repayment.

Summary

To sum it up, getting the best car loan deal is just as important as the type of car you choose to buy. Don't let yourself be rushed into any financing option - take the time to research, compare options, and find the best deal for you. Autochek Uganda is a great choice for car financing that should be taken into consideration during your research process.