Are you searching for the best car finance for your needs? Finding finance that works for you isn’t just about grabbing the first deal you see advertised. Your ideal car loan needs to tick all the boxes. If you’re looking for an outstanding option in car finance – you might benefit from avoiding these five mistakes.
1. Beware of fees
Your car finance isn’t going to win any awards if it costs you an arm and a leg to set it up. Make sure you’re aware of any fees and charges before you sign on the dotted line. These could include charges to make additional payments as well as establishment and settlement fees.
2. Watch out for low interest without flexibility
It’s all too easy to make the mistake of thinking that a low interest rate represents the best deal you’re going to get in car finance. The reality is that low interest over a long period of time may end up costing the same as higher interest over a shorter time frame.
If you think you’re going to have the ability to pay more off faster, for example through lump sum payments or increasing your repayment level over time, explore flexibility in your car finance. The best option in the longer term may be a slightly higher interest rate that comes with the flexibility to repay your loan sooner if funds become available.
3. Payments too high?
Many people feel that the best way to handle car finance is to pay it off as quickly as possible. In order to achieve this goal you may make your repayments as big as you can so you can clear your debt faster.
Take care not to overreach with your budget and leave yourself unable to make a payment. Missing payments could impact your credit record for the longer term. It’s important to review your budget carefully before setting up your car finance. And remember: the best repayment level will be one you can afford to maintain.
4. Payments too low?
It’s tempting and smart to hold back some money for a rainy day or because you don’t want to push yourself too hard when you set up your car loan. But just as a repayment that’s too high can cause problems; a repayment that’s too low can also be problematic. Why? It can cost you money in the long run.
Finding a happy medium means pushing yourself within reason and without stretching your budget too far. That should allow you to repay your loan faster than opting for a lowest repayment amount offered and reduce the cost of borrowing. If you’re still feeling cautious, why not review your car finance in 12 months time and see if you’ve got the best repayment level for your budget.
5. Don’t sit back and ignore it
Reviewing your car loan regularly is an important part of making sure it’s still working with your needs. Your car finance can often benefit from being updated in line with changes in your income, your expenses, the market, and interest rates in general.
Just like an annual service on your car, scheduling in an annual review can help you make sure you’ve got the best performance from your car finance. Then if you need to, you can take the opportunity to fine tune any details and know you’ll be getting the most from your borrowing.