Owning a car is one of the dreams that every individual nurtures.
Be it a compact hatchback one or a luxurious sedan, having a mode of transport at home makes daily commutation easy and comfortable.
Whether you dream of buying a new car or a used one, or whether you decide to gift yourself a compact Volkswagen Golf Hatch or a sleek and trendy BMW Z4, you end up contemplating whether you should go for full down payment and take home your dream car or to cash out the loan to get it.
There are numerous players in the car loan solutions field who offer to provide you with a better deal than others.
Their proposals might seem alluring and irresistible at the beginning but may have hidden trap doors which can become a financial burden for you in the long run.
Following are the five things you should be aware of while availing a car loan:
THE YO-YO TRAP
The automation financial service is increasingly becoming competitive with more and more financial institutions alluring customers with unique and attractive offers.
Yo-yo trap is a scheme which provides the probable customers with conditional financing. Under this plan, you are allowed to take home the car instantly which is a trap to make the client believe that the car loan has been pre-approved under his or her name since the dealer willingly releases the vehicle to him. But the reality is something else.
After the passage of a few days, the customer is informed about some anomalies and hitches in his car loan application, and the only option left with the hapless customer is to get it approved with higher interest rates.
The lenders often advertise about them offering lower interest rates than others to attract more buyers into availing the car loan offered by their financial institution. But it might prove to be a flytrap.
The loan rates are dynamic and can change on a daily basis as per the regulations of the Reserve Bank of Australia. You should always confirm the interest rates with the lending organization before committing to the loan.
EARLY REPAYMENT OPTIONS
You might come across the brochures or advertisements of the lender or financial institution approving the early payment option under the situation when you come across extra money and would like to decrease the loaned amount or pay it off entirely to exit the payment cycle.
But some lenders might charge you early exit penalties for doing so. It is worth confirming it with the lender before you decide to sign up with them.
SECURED AND UNSECURED CAR LOAN
You might have seen that some car loan rates are cheaper than the personal loans. The reason for this low rate can be attributed to the explanation that some car loan might be secured to an asset, which is your car in this case.
So, if by chance, you aren’t able to pay the loan and default then the lender which is the financial institution from where you got your car loan sanctioned would claim your car and auction or sell it off to another customer to retrieve the money you still owe them.
Lower interest rates might seem irresistible, but make sure to find out if the car loan is of the secured or unsecured type before you commit to it.
INTERESTS ON BAD CREDIT
You collect a bad credit score if you have too many debts and borrowings which are overdue or have not been paid in a timely manner.
A bad credit often defers the lenders from lending you loans of any kind and you might find yourself being turned away from most of the financial institutions.
Contrary to the majority in the market, some lenders would readily agree to offer you a loan even on the bad credit.
They might tempt you with options such as 24 hours quick approval, pre-approved loan or tailored finance solutions based on your financial requirements and capabilities.
It may be a trap set for you as they might provide you with car loans with higher interest rates. It is necessary that you first ascertain the interest rates from them and then agree to sign the papers.