Getting a car loan is not just about striking a deal, but also about financing your car in the safest possible way, keeping in mind the long-term future. Many people end up committing certain car financing mistakes that end up causing them irreparable loss. Here is a list of some of these mistakes that you should avoid.
Not knowing your credit score
Being unaware of your credit score before applying for a car loan is one of the most basic and avoidable car financing mistakes. A high credit score gives you room to negotiate with the lenders on the rate of interest. If you have a high credit score that is from 750 to 900, then it would be easy for you to get a car loan, and that too at a low rate of interest. So, it is vital that you check your credit score before you approach credit lenders. If you find your credit score low, then first work on it, build your credit score and then apply for a car loan, to avoid the higher interest rates.
Opting for a long-term loan
Looking for a long-term loan again is one of the common car financing mistakes. This is because, while long term loans have less EMIs, the interest amount you would have to pay in total will be more as compared to short term loans. So, avoid the urge of low EMIs with long tenure and instead try to finish off your loan as early as possible, as it would save some extra bucks.
Getting penalized for paying off early
To avoid this as one of the car financing mistakes, do read the terms and conditions of the loan properly before signing the documents. Many banks and NBFCs charge some penalties if you opt for paying off your loan before your loan tenure ends, meaning before the foreclosure of the loan. While other banks, on the other hand, do not have any prepayment charge, ending up saving you some money. So, it is better to look for banks and other credit lenders that do not penalize you for opting for an early payoff.
Buying unnecessary services
When you set about getting a loan for financing your car, you will find that many lenders will advertise additional services such as life insurance schemes and warranties. These are supposed to pay off your loan in case there is an accident or unfortunate incidences like death or disablement. Experts believe that although these services are beneficial, they are often rolled into loan financing, which you should check for before signing the loan documents. Keep in mind these services have been designed for the benefit of the lenders and not for borrowers, to be precise.
By staying aware of these frequent car financing mistakes, you can get a loan and make the most of it, without having to bear excessive financial and mental burdens afterward.