Financing a Car For The First Time: Key Things To Consider Before Applying a Car Loan

You desperately need to buy a car, but you lack the cash or the required down payment. No worries! If you can’t pay cash, you’re going to need an auto loan. If you’ve never financed a car, you may not be sure about the process. One approach is to go to a lender, pick out your dream vehicle and let the dealer take care of the financing for you. Lenders establish all the laws and protocols that are followed with regards to the purchased vehicle.

But with so many car loan dealers around, securing your first car can be a very overwhelming process. Buying your first car can be a great investment that makes getting to work on time, visiting friends in any corner of the place  and makes our life easier. But it’s also a major financial decision.

You need to first know what a car loan is and how does it work?

A car loan (auto loan) is a sum of money a consumer borrows in order to purchase a car from a lender. When taking out a loan a borrower agrees to pay back the full loan amount, as well as any interest (a percentage of the loan amount, usually calculated on an annual basis), by a certain date, typically by making monthly payments. When a borrower takes out a loan on a car, he or she is agreeing to buy the car. Upon entering into the loan agreement the borrower gains the right to drive the car, while also taking possession of the car’s title. Technically speaking, however, the borrower does not yet own the car; the lender owns the car until the borrower has finished paying off the loan.

While your monthly auto loan payment will depend on the car price, down payment, length of the loan (term), and interest rate of the loan, then it  highly depends on your credit score. 

Pros and Cons of Car Loans

Pros:

• Car loans usually have a lower rate of interest.
• It is easier to avail a car loan.
• Since it is a secured loan, an individual with a mediocre credit score is also likely to be eligible for the loan.
• The vehicle itself acts as a security against the loan.

Cons:

• You will be required to provide a down-payment.
• The car will be hypothecated to the bank and you will receive the complete ownership only after all payments have been made.

Common Documents you required to get car loans:

• Identity proof (any of the following) : it can be Citizenship, Passport, Driving licence, Voters Id card or PAN card
• Address proof : Citizenship, Passport, Driving license or Utility bills
• Proof of income: Latest Income Tax Returns, Bank statements going back 6 months

Some of the key things you need to consider before approving a car loan. 

• Check your credit score: Keep it simple – Choose the car before applying for the loan and make sure the cost of the car fits your budget.
• Save for a down payment
• Consider a car loan 
• Get preapproved for a car loan 
• Consider a co-signer for your car loan
• Look beyond the interest rate : Choose a loan that offers you the best interest rate along with the loan amount you need to Opt for a shorter loan term.
• Consider biweekly payments.
• Check the insurance premium for the car as this is a recurring cost. Price insurance based on a specific type of car. 
• Hidden Fees and Charges – Sometimes what appears as obvious will have a hidden component. Be aware of the hidden fees and charges concerning the car loan.
• Special offers – There could be special offers available when you are applying for your loan. Compare all offers available to find the loan that offers you the highest loan amount and the most affordable interest rate. Make sure you take advantage of them. 
• Loan Agreement/ Contract

In a nutshell,  Auto Loan makes owning a car effortless by providing a competitive interest rate, requiring easy documentation and quick loan disbursal. Now owning a car doesn’t require years of planning and saving. If you have questions about the right car loan for you, Active Mortgage can help.Just choose the best car for yourself and Active mortgage will help you in making it your own. 

Active Mortgage helps you know your credit score, compare and evaluate the rates the banks are offering, let you know how much down payment is required and all the hidden costs and repayments. Your first brand new car is just a call away.

Get preapproved for an auto loan today.

We make it easy to get behind the wheel of a new or used vehicle. Save time with our convenient online application and enjoy great rates and flexible terms.

Contact us today to get started so you can find the perfect vehicle for you.