Having one’s own means of conveyance is the most basic need of today’s era. If you are amongst people for whom making an up-front lump-sum payment for a car is not feasible, then you need to consider securing a car loan. The task of getting a car loan requires pre-planning. Here are top five things to consider before you set out securing a car loan in Arab states:
Ascertaining your budget
This is the first and the most basic step. You have to ascertain the portion of budget you can freely allocate towards making payments in lieu of the loan. Most institutions offering car loans give a loan calculator or a predefined payment schedule. The calculator or the payment schedule takes into consideration various aspects such as the overall tenure of the loan repayment, down payment and overall cost of the car to give you a precise amount to be paid on monthly basis. There are places that allow flexibility to pay on a bimonthly or even trimonthly basis. It is therefore imperative to consult different payment schedules and loan calculators extended by different service providers to choose the one most suitable for yourself.
Riba (interest) free car financing or conventional financing
Major concern for people in the Middle East is whether their vehicle financing is Riba (interest) free or not. Before entering into a deal with a dealership or any financial institution such as bank, make sure they clarify the mode of financing. There are specific banks and dealerships out there that do provide Riba (interest) free car financing under different names. The terms of payment under Riba free banking differ from those of conventional financing. Make sure you properly understand each and every tenant of your Riba free car loan agreement.
Selecting between a brand new or second hand car
Car loans are available for both brand new and second hand cars. The question you’ve got to ask yourself is which one is the most feasible for me? At a glance, getting a loan for a secondhand car seems more attractive than going for a brand new one, but if we look close, things might look different. New cars are more fuel efficient, cost less insurance money and need less maintenance plus they come with perks such as warranty on parts, free service for a year etc. Over the course of years, the money you’d save with a new car will justify the initial gap in the price paid.
Avoiding hidden costs
There are expenses that are not visible at the time of purchase, which normally include car registration and documentation charges. You’ll get to know about them after you’ve signed the deal. To avoid getting slapped by these, make sure to specifically ask your dealer or bank about hidden costs beforehand. In this regard, a little homework would pay rich dividends, as dealers and banks take care of these costs on behalf of their customers. You just have to be vigilant about finding one.
Car Loan extension offers
Loan extension offers from the dealership or the bank might sound very attractive, but think twice before availing them. Loan extension entails paying more for another year or two which may weigh down your budget unnecessarily. Instead, it’s advisable to make a little extra payment each month to pay the balance amount owed faster.