Common mistakes to avoid in applying for a car loan
Updated on September 20 2023
Are you searching for the right car for some time now yet, cannot fix your mind on what vehicle to pick? Or, which bank to apply for a car loan? We are here to guide you. We will cover the most common car financing mistakes to avoid in 2022 and ways to solve them. By reading the information below, you can steer clear of the inconvenience from those mistakes and become a smart car buyer.
Outstanding debts from other credit unions
Having bad credit history of the borrower is the common reason for getting denied. The bank can check your ability to pay debts from your previous loans. If you still have a balance, this will give the bank an unfavorable impression about your capacity to pay. They will not risk investing money without the assurance of getting a profit margin.
Tip: To avoid this, make sure to pay your debts from other companies first before applying for a car loan in any bank. Determine how much money you still need to settle the amount. On the other hand, if you cannot fulfill your financial obligations within the period given by the lender, it is highly recommended to push back your application for a car loan first.
Try to save money so you can pay all your debts. Once done, go back to the bank and resume your application. Remember, you have a higher chance of borrowing money from any car financing company if you have a good credit score.
Downpayment too little
Even though several lenders offer less or almost zero down payment to the cars for sale, bear in mind that there is a consequence to this great convenience. Yes, you can get your desired vehicle without a large amount of cash. However, this leads to a higher monthly amortization and higher bills in the long run.
Tip: If you want to save more money, it is advisable to go to the traditional way of paying a large down payment once you have decided what type of vehicle you wish to take home. This way, your payment terms can be shorter. Thus, you can enjoy the extra savings that you can get for other things like investing in a small business or sending your kids to a better school.
Failure to research
With the advent of technology these days, information about certain car financing services is almost present anywhere on the internet. Businesses already use the power of search engines to establish their online presence and attract more borrowers. However, people still fail to research the bank or credit union before applying for a car loan. It could be avoidable if they knew the terms and conditions beforehand.
Tip: Look around for popular lenders in your area and choose which one has the highest customer rating. By visiting their official social media pages, you will know what other people say about them, especially their past customers. Aside from that, you will get additional information that will help you decide if it is worth risking your hard-earned money for your desired vehicle through them or not. It may include the available car models that can get approved for a car loan, the length of time that you will pay for it, and of course, some freebies for good payers. You can also seek advice from your friends and loved ones who already got approved in that company. By doing this, you can determine your financial capacity before availing of a car and think of ways to fulfill your obligations.
Aiming too high, too soon
Having your car is an achievement, especially for people who have worked so hard to get one. However, this can also be a financial burden if you purchase something way higher than your income capacity. As a result, you will have to sacrifice other matters in your household to pay your debt to your chosen car financing company.
Tip: To avoid making this mistake, pick an automobile you can afford. For instance, do not force yourself to buy a top-of-the-line vehicle if your budget is only limited to the lower variants. Don’t worry! Nowadays, car manufacturers have improved their value propositions, allowing buyers to get something packed with features. It means that even affordable models can be ideal choices for those with a limited budget. On the other hand, you can also consider buying preowned automobiles to save more money.
Automart.Ph offers value for money repo cars from popular models and brands, suitable for any car buyer. Just browse our online listings and look for your desired car. You can also send us a message to help you in your car shopping escapade. Aside from that, we provide (free) inspection from our reliable mechanics to ensure that everything is working well in your vehicle before you take it home. With our wide variety of choices, you can certainly buy a car packed with all the features you need, home.
No financial backup
Back in the day, people who have regular jobs in the Philippines already felt secure in their future. Their families have insurance to back up their finances in case of emergencies. Aside from that, they had assurance that their companies stood firm whatever happened in the economy. Things started to change after the pandemic, Covid, hit the world in late 2019. A lot of businesses filed for bankruptcy due to several mandatory lockdowns. Even established companies did not escape the negative economic effect of the virus.
As such, millions of people lost their jobs. This reality soon resulted in a financial crisis that made some people lose their homes and other properties like cars. Unfortunately, the vehicles they were paying for ended up repossessed.
Tip: Since the future is already unpredictable and anything can happen to your business or job, make sure to save an ample amount of money first before applying for a loan from any car financing company. Save a certain percentage of your monthly income. You must place it in a different savings account and do not touch it. Consider it an emergency fund that you can use should you lose your source of income for another reason. Yes, this may take a while, but having a financial backup will ensure that you can continue paying your car loan no matter what happens. So, even during a crisis, your beloved vehicle is still with you.
Jumping the gun
Getting a loan from a car financing company is a huge financial responsibility. You have to be ready from start to finish to avoid the consequences. Your funds must be more than enough for all your monthly expenses so you can still enjoy your hard-earned money at the end of the day and not be disappointed with what remains in your bank account.
Tip: Think carefully before scouting around for a new automobile. Analyze if your income can sustain all the car payments you may encounter, including the sales tax, downpayment, and monthly amortization. Do not forget to factor in running and maintenance costs. Additionally, determine if you are mentally and physically ready for this new chapter of your life. Remember, paying your debts on time is not enough. Your emotional health also plays a vital role within the payment period.
Yes, getting a car is not as easy as it sounds. There are other matters that you need to bear in mind to succeed. The mistakes mentioned above can help you analyze things thoroughly before buying your dream car. As a result, you can make better decisions while enjoying the car shopping process. And of course, for all your auto needs, i-Automart na yan!