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Applying for a Car Loan

By: Bill Raymond

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Once you've done your finances and worked out what amount you can afford to repay on your new car loan, the next step is to set up your car loan.

This will put you in a idyllic position, not only to parlay a better deal, but to make sure that you don't get taken for a car loan that doesn't meet your needs, such as high interest, high fees and lack of flexibility.

Types of car loans

There are two types of loans you can use to purchase a car loan - an unsecured loan and a secured loan. A car loan is generally a secured loan.

A secured loan lets the lender to take security of the car until the loan is paid off. This permits the lender to reclaim the car if the borrower cannot repay the loan, as opposed to having nothing if the loan was unsecured.

The assistance to the lender by offering a secured loan is that the interest rate on the loan is typically lower than a comparable unsecured loan.

Opt for the loan term that matches you.
The length of car loans can vary. Repaying the loan over one year will mean the repayments will be high and the interest expense smaller. Although, over seven years the repayments will be much lower but the interest cost higher.

Work out if the repayments are adaptable so you can change the repayments to match your own personal circumstances as required.

Interest rates

The interest rate you sign up for will range upon the bank's criteria. This can determine whether the loan is secured or unsecured in addition to your personal credit value. The higher credit worthy you are or the higher your dexterity to pay back the loan, the likelihood are better that you will be receive a low interest rate.

This is solid reasons to arrange your car loan before finalising which car you wish to acquire. You may be presented a loan by a car yard dealer at a larger rate than you received by organising your own loan.

Some lenders will propose you a fixed interest or a variable interest rate. You should think about the duration of the loan term and the interest rate market before choosing. Both options have their pluses and minuses.

Lenders will determine an interest rate and a comparison interest rate. The comparison interest rate takes into account a typical loan and elements in the various fees that are owed. You probably shouldn't only compare the interest rate but the fees associated. Such as, the payments for one loan with a smaller interest rate may in fact be more than a comparable loan with a greater interest rate but smaller ongoing fees.

Fees

There are various different brands of fees to consider. These usually fall under the following captions. Ask the lender for the different types as it will help you to determine which loan is better suited to your needs.

Establishment Fee

Usually lenders will charge a fee to arrange or establish the loan which is commonly added to the loan amount.

Ongoing Fees

The majority of lenders will associate a monthly fee or account keeping fee.

Early Exit Fees

It is very likely that to exit your loan early the lender will charge you a fee to make sure their profit for arranging the loan. You should always work out what the exit fee is and if there are any other costs to get out the loan.

Late Payment Penalties

Similar to most loans you can be charged penalty fees for being late with your payments.

Application Process

In order to make an initial assessment, the bank will request for all of your personal and financial details. They should be able to give you an idea immediately on whether your loan will be successful subject to proof of details. Providing that information should take a small amount of time and in most cases can be done online.

Determining whether you can afford the loan shouldn't take too long. Assuming you receive a positive response the next stage will be to substantiate all of the personal information that you actually provided.

Information you will need to offer to the lender:

You will need to provide information of:
* proof of identity
* living address
* employment and income level
* assets
* liabilities

Individual lender criteria will range when it comes to the list of proof required. This is a list of documents that can aid you to provide the level of proof needed:

* Drivers License
* Passports
* Birth certificate
* Credit cards
* ATM cards
* Photo ID
* Pay slips or jobs contracts showing pay rate and time with employer
* Rates notice
* Rent receipts
* Phone bills

Statements from your:

* Banks accounts
* Term deposits (if applicable)
* Managed funds

Statements from your:

* Credit cards
* Personal Loan
* Mortgage

Gathering all of these documents prior to putting in your car loan application you will be able to assist the process and potentially get approval within 24 hours.

Article Source: http://depositarticles.com/

For more information and news about car loans, please see this page - Car Loans

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