Auto Finance – Getting a New Car with No Money

Not everybody hails from a well-to-do family, and thus getting a car (new or used) for the majority of people is difficult. This has however been simplified by auto finance; money lent to enable you to get a car if your liquidity does not cover the cost. The intricacies surrounding this loan are more or less the same as those of other loans.

These are the steps to take when getting auto finance: First ask yourself whether you really need a car lest you commit yourself to an unnecessary debt. Analyze your current budget to help you decide how much money you can spare and how much you will need to borrow.  Qualification (candidacy) will determine whether or not you are given the money. The qualification criteria include actual and disposable monthly incomes, security (typically a motor vehicle logbook or land title) and credit history: past and current bank balances, and reputation (it would be counterproductive for any institution to lend money to a serial defaulter); which factors determine the borrower’s ability to pay back the money lent to him. Some institutions may or may not ask for references, though a good number of them will vet the aspiring borrower.

Paying back the interest on the auto finance is a painful experience for any given borrower. To minimize the agony of it all, it is imperative to get a few comparisons from several lending institutions. Careful calculation of their respective payback schemes will determine the most convenient way of repaying the money, in terms of affordability (monthly installments) and total interest accumulated. Some lenders use APR (annual percentage rate) to calculate compound interest on the amount still owed; others base the APR on the original principal amount. Don’t forget to ask which formula each particular institution applies.

Hidden charges are another way in which a borrower can lose out on a deal. These include penalties on early repayment, insurance credit- where the borrower is sold an insurance policy along with the loan thus unwittingly getting a bigger loan than they originally wanted- or even promotions like you being required to pay for unwanted accessories for your car. Read the fine print on the loan agreement and ask about any features of the agreement on which you are unclear.

Finally, confirm that the lender will actually give you the auto finance. Word of mouth is not legally binding, and cases of lenders backtracking on their promises are not unheard of. If necessary, get a pre-approval. Failure to do so might lead to disappointment on your part and you having to start the process all over.

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