Buying a car is not cheap, especially if you want to finance it, because it will cost you more than the market value. A large portion of the population in Ireland hinges on loans to buy a car, whether it is a secondhand model or a brand new one.
Many of you think you do not have to get into a lot of formalities to buy a car. You just go to a showroom, pick a model, sign the deal, and get keys, but the fact is you are shopping for two different products: car and car loan.
You will certainly try to get a car that falls within your budget, but it is impossible unless you get an affordable car loan. Car finance in Ireland for bad credit can be slightly expensive because of a less-than-perfect credit rating. Buying a car may not be a challenge for you, but getting the best car loan deal can be a real challenge. Here are the tips to follow to get the best loan product to buy a car:
- Set a budget
You cannot buy a car unless you create a budget. You should know how much money needs to be stashed away every month so you successfully manage to grow your savings on time. You will have to find a way out to set aside the desired amount of money. Assess your monthly expenses such as rent, student loans, credit card bills, and so on.
These are fixed expenses, so you cannot change them. See how much money your budget allows for your car savings after paying these expenses. Try to make a scope by cutting down on your other expenses like groceries, apparel shopping, and the like. Try to save more than 10% of the car’s market value because chances are a new model will come on the market by the time you manage to lay aside.
- Check your credit file.
Whether you get a car loan from an online lender or consider a car dealership, they will look over your credit report to see your payment record. A good credit rating can help get the best deal. However, there are options for bad credit borrowers as well.
Sometimes a credit file is not impressive because of identity theft. Make sure such errors do not become the cause of an expensive deal. If your credit score is less-than-fair, try to improve it. PayingPaying your credits on time can prevent your score from going down. At the time of borrowing money, you should not have any other debts to be paid off. This is because this may question your affordability, and a lender may lend you money at a higher interest rate.
- Explore auto loan options
You can consider either online lending or dealership financing. After you have decided on the car you want to buy, you should think about the option that makes sense. Direct lending is an option that involves borrowing money from online lenders and banks. The latter is a suitable option for only those who have n impressive credit file. Banks do not entertain applications from those with bad credit ratings.
Online lenders can help you in this scenario. However, they will charge a slightly higher interest rate than those with a good credit score. Since interest rates vary by lenders, you should do thorough research so you get the most competitive deal. At the same time, you need to check your affordability.
Use online loan calculators to see how much it could cost you in total and what would be the size of monthly instalments. Check if your budget has room to pay down that instalment every month. If not, you would have to buy a cheaper model. Dealership financing is different from online lending. Dealers may grant you either a hire purchase or a personal contract purchase deal.
They both are similar in nature except for the fact that after the final settlement, you get the ownership of the car in your own name in hire purchase and in personal contract purchase, you have two options to make a choice between you can get the car title by making full and final balloon payment, or you can return the car to a dealer and walk out of the contract. You can get more details about both types of contracts from a dealer you want to buy a car from.
- Get pre-approval
Getting a pre-approval is the best option when you are confused about the size of the loan you can afford to pay back. It is always a good idea to know beforehand how much a lender would be able to lend you based on your repaying capacity. A lender will peruse your credit report and income statement to let you know how much they can offer.
They will run a soft credit check, so you do not need to worry about losing credit points. However, when you apply for the loan, they will run a thorough check, and the lending amount may vary from that of the amount given in a pre-approval letter. You can get pre-approval from multiple lenders, and you are not bound to take that offer. Note that this does not mean you will completely be dependent on it. Since the actual approved amount may vary, it is your responsibility to determine your affordability. The term of the loan can last between 18 and 24 months.
The final word
Getting a car loan is a big deal. As you can get it from a car dealer or a lender, you first need to determine which option is more affordable. The size of the down payment will also have an impact on interest rates.
A bigger deposit will let you avail yourself of lower interest rates as it reduces the size of the loan. This is a great way to offset the impact of bad credit scores partially. Get pre-approval for loans online in Ireland so you know how much you can get. The aforementioned tips will likely help you get an auto loan at a lower interest rate.
