6 mistakes to avoid when taking out a car loan

Buying a car is a huge expense, and taking out a car loan to pay for it can add to that burden. It’s important to be smart about your car loan and avoid making these mistakes.

If you’re able to avoid these six mistakes, you’ll be in a much better position to take out a car loan that works for you.

1. Not knowing your credit score

Your credit score is one of the most important factors in getting approved for a car loan, and it’s also one of the first things lenders will look at. If you don’t know your credit score, you can get it for free from a number of sources.

2. Applying for loans from multiple lenders

When you apply for a loan from multiple lenders, it can hurt your credit score. That’s because each time you apply for a loan, the lender will do a hard inquiry on your credit report, which can temporarily lower your score. Instead of applying for loans from multiple lenders, try to find one that will offer you the best interest rate.

3. Not shopping around for the best loan rates

Just like with car dealers, not shopping around for the best loan rates can cost you a lot of money. Lenders offer different interest rates, and by shopping around, you can find a lender who will give you a lower interest rate. When you’re shopping around, consider getting a Driva car loan, as you’ll be able to compare all of your personalised rates in one place with full transparency.

4. Signing up for a long loan term

When you sign up for a car loan, you’re agreeing to pay back the money you borrow over a certain period of time. If you choose a long loan term, your monthly payments will be lower, but you’ll end up paying more in interest overall. Instead, try to choose a shorter loan term so you can pay off your loan faster and save money on interest.

5. Not understanding the terms of your loan

Before you sign up for a car loan, make sure you understand the terms of the agreement. This includes the interest rate, the length of the loan, and the monthly payments. If there are any aspects of the loan that you don’t understand, ask a lender or someone else to explain it to you.

6. Failing to read the fine print

Be sure to read all the paperwork before agreeing to anything, this way you’ll know exactly what you’re getting into. If there are any hidden fees or penalties, you’ll be able to avoid them.

By avoiding these six mistakes, you’ll be in a much better position to take out a car loan that works for you.