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Everything You Need to Know About Getting a Car Loan

When you own a car, people view you as a prosperous person. A car also serves as a quick transport means. Therefore, people strive to own t least one car. Although cars are expensive to buy and maintain, you can take a loan to buy one. If you decide to take a car loan, there are several things you need to know. As such, we are giving you a comprehensive guide: 

 How Much Are You Eligible For?

You need to know your budget before applying for a car loan because the amount will depend on the cost of the car.  The lender will also determine how much you should pay in monthly installments. Therefore, you need to determine your budget and savings.

 Various Types of Loans 

 

There are four common types of loans: 

 Variable loan

The amount of loan you can get varies depending on the interest rate charged by the lender. If you opt to lower the interest rate, the installments also decrease, and vice versa. In a variable loan, the interest rate is lower than in a fixed loan. 

 Fixed Loan

As its name suggests, the interest rate for this type of loan is fixed throughout the loan tenure.   The monthly loan repayment remains the same irrespective of the market rates.

 Secured loan

In this type of a loan, your car is at the risk of being repossessed if you default in payment. This is because the very own car you own is used as collateral should you fail to pay it.

 Unsecured Loan

This is the opposite of the secured loan. In this type of loan, your car is not at risk of being repossessed should you fail to pay your dues. However, you need to show proof that you’re capable of paying your dues before you get the loan. This means that you should have a good credit score. 

 What Brand and Model Do You Want to Buy?

The model and the brand you choose will depend on your financial capability, and whether you want to an old or new car. If you opt for the latter, there are specific types of loans for that. If you want an old car, you need to determine whether the car’s model and age are worth taking a loan for. There are instances where you cannot obtain a car loan for phased out models. 

 What Special Features Do You Need In A Loan?

Apart from a basic loan, you can also opt for special features depending on your needs. These include:

 Additional Repayment

This feature allows you to make additional repayments of your car loan and save money by completing the repayment sooner.

 No early repayment penalty

This loan feature allows you to pay off your entire car loan when you have excess money without getting penalized or charged a higher interest rate for early repayment. This is a really great feature as you get to pay your loan sooner than its intended tenure if you have some excess money in your pocket, thereby freeing yourself from the debt.

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