Car financing is the process by which a borrower uses his credit to obtain a loan to purchase a new car. Whether the purchase is for a used or new car, it is the amount of money borrowed that is the most important factor in obtaining a loan.
A potential or prospective buyer must be able to present a loan proposal and therefore needs to have enough information to make an informed decision. This involves the financial status of the borrower as well as other factors. Some of these can be found out online and this article will go through some of the main elements of car financing.
The first step in any process is to verify the information contained in the credit report that lenders require. This can be achieved by requesting a copy of your credit report for free. The first few pages will have an item called “accounts closed” and this simply indicates that you have had a bankruptcy or insolvency proceedings. Take for example, Jared. He works as an IT support engineer. Jared was able to get a great deal on a new Honda Civic from his local dealer.
To further confirm if the information is correct, request a report on bankruptcies and other information that can prove your identity. You are not required to include all of the available information as this may include companies that you may not wish to be associated with.
Once this is completed, you should be able to present options to lenders to explain your situation. It is usually best to ensure that your personal details are correct to reduce the chance of a mis-sold loan.
It is important to note that in most cases the decision will not be made quickly but through the medium of an approval letter. Make sure that the letter states the exact amount of the loan that you need and that it is secured against your personal asset.
This may take a little longer to achieve than an unsecured loan as some lenders are leery of lending money to people who have no assets.
The letter should also state the rate of interest that you are paying and what the full amount of the loan is, including the total amount that you have borrowed and the duration of the loan. It is vital that the letter clearly states that you have taken out the loan as the terms of the letter have been met.
When the approval letter arrives, try to get a reply as soon as possible. This is because it will also be possible to apply for a loan at a later date and it would be better to have the necessary funds available when your next scheduled loan application comes around.
The most important thing is to have a clear plan in place so that when the process of applying for a loan begins many months from now, it is much easier to achieve. If you do not have a plan then you could end up repeating the process again when you need a loan.
In addition to presenting an approval letter, it is also a good idea to send out a second application for a loan.
- These should only take a few minutes to complete so keep that in mind as well.
- When the bank receives your application and the loan, they will do a credit check.
- This means that there will be nothing to worry about.