The car loan process can seem daunting if you’ve never been through it before. Applying for a car loan may represent one of the biggest purchases you’ll ever make (besides a home) so it pays to understand the process. Below you’ll find the car loan process explained in five easy steps. And if you have any further queries about how to apply for a car loan, there is plenty of free information available online and from finance organisations that handle car loans, such as DreamLoans.
1. Apply for Your Loan
This part of the process is usually quite quick. Simply contact the car loan company with whom you would like to do business and apply for your loan. There are a variety of car loan companies to choose from, so don’t be afraid to shop around and find the best deal for yourself. Consider the length of the loan term as well as the interest rate, because you’ll want your repayments to be as manageable as possible.
2. Your Loan’s Pre-Approval
Pre-approval of your car loan happens during the application process. It’s the part of the process where you will need to provide proof of your ability to service the loan (that means demonstrating your ability to make the repayments on time). You will need to provide payslips and/or financial statements for this.
3. Your Loan’s Approval
Once the car loan company has checked you out, you will receive your loan approval – and then you can get serious about getting your hands on your new car. Be aware that before the car loan company approves your loan application, they will check your credit history and may contact your employer.
4. Signing You Up
Once your loan has been approved, you will receive the documentation to sign. This is a very important part of the car loan process, and if you’ve never signed a loan contract before, be sure to take the time to go through the paperwork carefully. Get a thorough understanding of your rights and obligations under the terms of the contract before you sign anything. Ensure all your questions are asked and answered to your satisfaction. Get as clear an idea as possible about what you are signing, and don’t be afraid to ask for a legal opinion if you feel you need it.
Most people forget about this part of the car loan process because it doesn’t happen until some months or years after you get your loan and your new car. Settlement is the part of the car loan process where you complete the borrowing. That is, you own your car outright once you settle your loan. This usually happens at the end of your loan contract term (most car loan periods are for around five years), but you can sometimes settle your loan earlier if you wish.
The process of getting a car loan is not difficult or lengthy, but it can be daunting. Make sure you understand each and every step. Remember: once you’ve signed the contract, you are legally responsible for the debt.
Have you or anyone you know recently applied for a car loan? What advice would you give someone about the car loan process if they asked you today? Share your insights in the comments below.