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Know the Dos and the Don’ts before Applying for a Car Loan

By Faeza
15 September 2015

You’re about to embark on a three- to five-year journey with your beloved car. Before you apply for the car loan at the dealership, are you absolutely confident that you know everything there is to know, ‘til loan do you part?

Luckily, Wesbank is here to help you unpack the boot full of boo-boos that first-time car buyers make, so you don’t get trapped in a cycle of debt.

So what are some of the dos and don’ts that you should be aware of before you apply for your car loan?

Dos:

  • Apply for a car loan that is within your budget and make provision for all the mobility costs (petrol, maintenance, comprehensive insurance and car washes).

  • Make sure you saved enough to put down a big deposit. If you have a big deposit this knocks money off the purchase price, you end up borrowing less from the bank, and pay your car loan off sooner.

  • Maintain a good credit history. Always pay your loans and bills on time. The bank looks into your credit history to make sure you are a good borrower.

  • If you are looking at a used car, consider extending the warranty or service plan to ensure you are covered once the current plan expires.

Dont's:

  • Don’t be tempted to go above your car-buying budget. Your loan has a higher chance of being rejected because the bank can see that you can’t afford the monthly car instalment.

  • Don’t be embarrassed about going for a cheaper or used car. A small car is the first step to one day owning your dream car.

  • Don’t apply for a car loan just after starting a new job. Rather wait for a couple of months, as this helps to increase your stability status. This counts in your favour when applying for your car loan.

  • Don’t increase the length of your car loan unless money gets tight. The quicker you pay back the loan the less you pay in interest.

Now that you have gone through the common mistakes that most first-time car buyers make, you may need to double-check your budget one last time before you apply for your car loan. Rather be sure than stuck with a car that is burning a hole in your pocket.