It is everyone's dream to own a car. This makes people to take loans in order to be able to buy the brand of car one desires to have in life. However, great care is needed before applying for the loan to ensure that you apply for the loan that you can pay comfortably without straining or neglecting other basic needs. You need to be sure of what you are doing before committing to sign any loan agreement. There are a lot of expenses that accompany a new car, and therefore you need to ensure you have the ability to cover all the expenses before buying the car. Below are some key factors to consider before applying for a car loan.
Annual Interest Rate
It is good to note that annual interest rate is not similar to APR that encompasses other expenses related to the loan. Annual interest rate has an effect to the total amount you spend each your on your vehicle. A high interest rate costs buyers a lot of money than a low interest rate. It is always advisable to ask about the annual interest rate before making a loan agreement. Elevated interest rate increase the value of the car you want to buy, this can lead to default in the payment.
Monthly interest rate
This is not the total monthly payment, but refers to the rate by which monthly car payment tax is calculated. The monthly interest rate can alter your monthly payments significantly. It is good to inquire about these figures from the agents providing the loan before purchasing the car. You need to be proactive in the purchasing process in order to get affordable monthly interest rate. It is good to note that monthly payments increase as a result of monthly interest rates.
Insurance costs of the car
The insurance cost of a car differences is determined by the kind of coverage selected. There are some auto loan firms that require a loan applicant to posses full coverage. Ensure you enquire with many insurance agents and ask the rates charged before purchasing the car. The most advisable thing to do is to use the same firm in order to obtain reduced rate on your car insurance.
Cost of Fuel
Before applying a loan for a car loan it is good to consider the fuel cost you will incur. For instance, it is good to consider that a new car might require expensive fuel type, the cost of fuel might rise as times moves and understand the fuel mileage of the car you intend to purchase.
Repair and maintenance cost
The expenses related to car repair cannot be predicted. The cost always rise when there are unexpected things that happen. Even if your bank has a lot of money, you may default your loan payments if you take some money from the bank account to handle such car emergencies. This will also affect your credit score. It is therefore, advisable to set some money aside to cater for such unexpected cost.