It’s not unusual to hear family, friends, colleagues, and even spouses say they had taken a loan to purchase a car of their choice or their “dream car,” so to speak. Then you begin to wonder how they can afford such (beautiful) cars when you know how much is on their paycheck. If you are thinking about inheritance or some jackpot, these are possibilities but not always the case. In most cases, they were able to secure a car loan to enable them to finance the purchase of the car. How does a car loan work and how easy is it to get one? We will discuss these and share tips on how to get profitable car loans. A car loan can best be described as an agreement entered into with a financial institution, say a bank, or any other legally recognized entity capable of offering you money to buy any car of your choice with arrangements on how you will repay the money given to you.
What’s the Duration of a Car Loan?Typically, a car loan spans between 24 months to 60 months, even though the duration could be extended.
How Much Interest Do I Pay Back?A car loan is usually split into two parts; the capital and the interest. Whatever percentage is agreed upon (depending on the interest rate) as a monthly payment, will be used to service the capital until it’s fully paid – then, the other aspects including interest, tax, and additional fees come next. Have it in mind that interest rates vary from lender to lender, as such, you should seek professional advice and concisely discuss the terms of the loan.
What Do I Need to Acquire A Car Loan?Most lenders would ask for proof of employment, evidence of tax payment, and documents showing how much you earn – this is to help them determine how much loan you are eligible for. Another document a lender will be interested in is your credit report – A detailed document of your credit history in the form of loans or debts. If you have a good credit history (meaning that you are prompt with paying mortgages or loans), you stand a better chance of getting a car loan; otherwise, your request may be declined.
Benefits of Car Loans – Why Do People Take Car Loans?
- Quick Fund
- Future Savings
- No Collateral Needed
- Healthy Financial Management