If you haven’t yet, then halt!
Are you prepared to get a better deal?
Let’s get armed with the knowledge and the documentation required before wading into the sea of car loan options and finance structures that are available.
Some handy tools to have in your survival kit:
- A strict budget.
- A deposit in the way of cash or trade.
- The best credit rating you can muster.
- A strong will to gather your options prior to making a decision.
The first thing you should do is have a strict budget in mind. This means taking your after-tax income and deducting on your calculator all the monetary outgoings that life drags us down with; including all your bills, i.e. phone, electricity, gas, rent and your general living expenses. Next tip: Imagine you have the car in your possession; you now need to pay for fuel, maintenance, registration and insurance costs (yep, you guessed it, use the minus button again). Once you have taken away all these expenses, you now have a figure on which you can base your future loan repayments. Your budget is complete and you now have a strict repayment you need to keep your loan repayments under!
Your credit file
You might not know it but there are definitely ways that you can improve your credit file. With the introduction of positive credit reporting in Australia since March 2014, it has never been more important to be proactive in protecting your credit rating. So, if you have planned this well and have allowed yourself enough time, you may be able to work on your credit rating before applying for a car loan by following these handy hints. The first thing to consider would be to get a free copy of your credit file from an online credit reporting agency like Veda Advantage. Find out if there are any defaults and contact relevant parties to sort them out and if required get them paid and updated on your credit file.
Other tactics include paying off your credit cards or lowering the balances or even try seeking out 0% balance transfers to another credit provider. It is also essential to make sure all your current commitments are up to date and your credit file is protected by not submitting any needless loan enquiries just to seek out a rate and repayment from the lender. Tip: Be careful with financiers that provide online applications as some can place a formal enquiry on your credit file. Warning signs to look out for are the need to provide your driver’s licence number or date of birth. These will be marked as a required field with an asterix.
Get into the mindset
Next, pretend you are paying off your car loan. Set up a direct deposit into a savings account for the amount you would be spending each week. A good amount to save would be at least 10% of the total loan amount. Lenders will look favourably on loan applications if they have a deposit to contribute and it may be that extra trust that gets you over the line to being approved.
We are getting close! The next step in the journey is to find a car that fits your budget and seek a loan with the best rates and suitable terms.
At this point there are generally four options to consider when shopping around for a good deal:
- Comparison sites (such as this one);
- Your bank/credit union – Banks and credit unions provide extensive advice on their products and are a safe option when shopping for a car loan;
- Finance through a car dealership;
- A finance broker – Finance brokers have industry experience and can help you find a tailor-made loan from all the major banks and credit unions.
So there you have it, a survival toolkit for getting the best rate and the maximum savings for your family on what will most likely be the second biggest purchase of your life, without ruining your credit file.