There are several advantages to choosing bank car financing. A lot of people opt to finance their cars with bank loans because their monthly car payment premiums tend to be affordable, and the interest rates are lower compared to other sources. Banks are also known to provide a longer time period for the borrowers to repay the loan, and this is possible because the banks can adjust the amount of the monthly premium so that it is more affordable for the borrower. Banks often issue a “pre-approval” even before you choose the kind of car that you want; then the bank will clear you for a specific amount for your loan, and you can use that number to choose the price range for your car.
But how do you choose the best bank for car financing? Here is a rundown of some of the variables and guidelines that you need to consider when deciding on one that is best suited for you and your needs:
Loan Term – This refers to the period of time during which the borrower has to pay the loan back. Most of the time, car loans are repaid in monthly premiums and could last between one and five years, although sometimes, they can last up to seven years. Make sure that you have the means to pay the monthly due. Otherwise, the bank can repossess the car.
Principal Amount – This is the total value of the loan minus the interest. To find out what the principal amount is, begin with the purchase price then subtract your down payment. Then, add after-market purchases that you opt for like health insurance, credit life/accident insurance, warranties, etc.
Interest Rate – This is the fee that the borrower pays for the use of the money that he or she borrowed from the lender. The interest on an auto loan is expressed in APR (Annual Percentage Rate). You have to be aware of whether the interest is calculated as simple interest (interest is paid on principal alone) or not. Sometimes, you’ll pay the same interest monthly, and sometimes the interest is higher at the start of the loan. The average car loan interest rate in the UAE is a bout 3%
Credit History – This is a report documenting how the borrower handles his or her credit. It includes details of loans, repayments of mortgages, credit cards and other debt owed by the borrower. It will not only contain open accounts, but it will also include all credit card accounts, loans applied for or closed, and information on late payments, bankruptcy, high balances on credit cards, and defaults on loans. Good credit history is one of the first things that a bank verifies before approving a car loan application, so you have to make sure to maintain good credit prior to applying for an auto loan.
Inquire and apply for a Loan at Several Banks – Contact your bank and other banks in your area and inquire about the car loan features and benefits. When filling out an application, diligently ensure that your details are correct, as inaccuracies found after the bank has verified your information may terminate your chance to get approval for your car loan. The bank will certainly look through your credit history, and having a good credit history will increase your chance of clearance.
Applying for car financing can be challenging, but learning about all these variables will equip you to choose the bank that can offer you the best car financing deal.