2023-08-08 16:59:11
Applying for automotive financing can be a great alternative, but it implies a significant commitment. For this reason, there are several factors that you must attend to to ensure that you make an informed choice.
Request a automotive financing It can be a great alternative, but it involves a significant commitment. For this reason, there are several factors that you must attend to to ensure that you make an informed choice.
So you can find a car that meets your expectations, without having to put your finances at risk.
automotive financing
7 things to consider when applying for car financing
Starting with basic concepts and good practices, remember to take into account the following:
1. The interest rate
The interest rate is a key concept that you cannot forget: it is the percentage of the loan that the financial institution charges you in exchange for providing its services and financing.
Interest rates vary between different entities and change over time. The only way to get a good rate is to quote different options and regularly check for changes in the market.
2. The term of the loan
Likewise, the term of duration of this financing is crucial. On the one hand, a long term allows you to pay lower monthly payments. On the other hand, the more installments you pay, the higher the Total Cost of Credit (CTC) will be.
The variation in terms is high: you can get a loan for 12 months and even up to 60 months, depending on the financial institution. Look for a term that, within your possibilities, allows you to pay for the car in the shortest possible time.
3. Traditional automotive credit vs smart purchase
In a traditional creditafter putting a minimum foot, you must pay the rest of the credit in installments, during a term that can be extended up to 60 months.
With a smart buy, the foot you deliver can vary, ranging from 20% to 49% of the value of the vehicle, depending on the terms. Likewise, the payment term can be extended between 24 and 48 months. Depending on the latter, the amount of the final installment will vary between 50% and 30%. Once this period is over, you can choose to keep the car, exchange it for a new one, or return it. As you decide!
While smart buying can be very useful if you’re looking to renew your car from time to time, traditional credit may be more convenient if you want to keep a car for the long term and have more payment flexibility.
4. They will review your credit history
Another key factor when talking about a car loan is your credit history. It is a record of your historical behavior with other financing. It says a lot about you, such as your ability to pay, your ability to manage finances, and your punctuality in meeting installments.
Financial institutions review this in detail, as they want to know if you pose a risk to them by lending you capital. The better your track record, the better your chances of getting good terms.
5. The documents that will be requested
These documents vary by institution. Either way, keep things like:
Proof of address. Valid identity card. Recent settlements (in case you are a dependent worker). Recent receipts (if you are an independent worker).
Likewise, it is common for them to request your tax return and proof of wealth.
6. Consider the conditions of the credit agreement
A credit agreement is a long-term commitment. For the same reason, you want to make sure that you don’t leave any points unreviewed. Pay attention to aspects such as installments, the rate, the total cost of credit (CTC), operational expenses, etc.
Another aspect that you should consider is that, when you buy a car with a loan, your vehicle remains a pledge until the installments are paid in full. This implies some limitations, such as that it cannot be sold and that, in case you want to travel outside the country in it, you must obtain a special permit from the financial institution.
7. Take advantage of the automotive credit simulator
This helpful tool will help you make informed decisions. A simulator allows you to enter information about:
The car you want (if it is new or almost new, its brand, model, year). The standing amount you can pay (an amount that equals 20% to 50% of the total price of the vehicle). In how many months do you want to pay off the loan?
With this, the simulator will calculate the amount you must pay monthly. You can enter different terms and conditions until you find the option that best suits you.
Ready! Taking into account all these elements and with the support of a automotive credit simulator, you can make sure you get the car of your dreams with financing that suits your needs. The sooner you start researching, the sooner you’ll have your new car.
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