Things you need to watch when applying for a car loan

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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, updated on June 9th, 2023       

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So, you managed to get out of work. It 7:00 pm and you still got some errands to run before you get home. There’s the dry-cleaning and you have to also get something to eat for dinner. So, when you are done with them, you realize that it is 8 pm and you will probably get home by 8:30 and start eating by 9. You are in the bus, on your way home, filled with luggage and dreaming about the day when you will get to have your own car and when you will no longer have to catch the bus.

Now, it seems impossible for you to continue like this and you make a decision: you are going to get your own car. With the proper determination and will, you decide to dive in and apply for a loan. Here’s what you need to know when you get to the middle of the problem:

Check your credit

You probably have heard this by now, but it is important to remember the fact that the credit score is going to be the key to the amount of money you will have to pay as a rate for your loan. If you haven’t applied for a loan before, it is crucial to remember this fact. The higher the credit score, the bigger the chances for you to get a low car loan rate.

The information you find in the credit score is based upon the information in the credit reports, so make sure that the data revealed by the credit score is as accurate as possible.

Choosing the payment method

This is how you can actually realize the amount of money you can afford to pay every month without restraining your budget. The loans made for cars are usually made for a maximum of 6 years. So, the longer the period on which the loan is made, the lower the monthly rate.

Getting the pre-approval

If you manage to qualify for a loan, you will first get a pre-approval which you will be able to use for a limited amount of time and for a limited amount of money.

Choosing your car

Once you manage to get the pre-approval, you can start thinking about the exact type of car that you want and need, without considering negotiating any financial terms too. Your dealer could beat the terms that have been offered in your loan. If that’s the case, then you should consider taking the offer. However, he might as well try to pursue you to take a longer loan. You will pay less every month, but in the end, you will spend more.

Ending the paperwork

With the final choosing of the vehicle and after negotiating the price, the dealer of the auto department will get in contact with your lender to finalize the sale. They are most likely to try and convince you of taking some add-ons such as extended warranty or paint/fabric protection. Make the thorough research first in relation to all these options, so you won’t feel obligated to make choices you know nothing about under pressure.

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