Western Advocate

4 common mistakes to avoid when financing a car

Avoid these mistakes when financing a car, by researching and understanding what kind of car loan best suits your situation. Photo: Shutterstock.

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When it comes to financing a car, particularly if you're getting finance for the first time, there are a few common blunders that are all too easy to make. By avoiding the below mistakes, you'll be able to save time and money and walk away with a car loan that works for you.

1. Not doing your research

If you're thinking about getting a car loan, it's crucial that you take the time to do some necessary research. There's a wide range of options out there, whether you're after a car for personal or business use, it's important to know exactly what each option entails before making a decision. Make sure you consider the interest rate, comparison rate, fees and conditions associated with each loan option. If you don't, you might end up with a loan that doesn't fit your needs or budget.

2. Failing to consider the total cost of the loan

When you're comparing loan options, make sure you're considering how much the loan will cost you in regular monthly repayments as well as the total cost over the life of the loan. Failing to properly budget for the cost of taking out a car loan can result in you defaulting on your loan (which would mean a hit to your credit score, and potentially the loss of your new car!).

3. Not being aware of your credit score

Before you even start shopping around for car loan quotes, it's a good idea to contact one of the major credit bureaus (like Equifax) to find out your credit score. Your credit score is often one of the main things that lenders will consider when they're assessing your reliability to pay back the loan. They'll also often use your credit score when pricing your loan; the higher your credit score, the lower the interest rate you'll be able to access.

It's also a good idea to request a copy of your credit history so that you can check for any errors on your credit report, and get these amended by a credit bureau before applying for finance.

4. Forgetting to shop around for the best rates

Just as you wouldn't buy the very first car you saw, you also shouldn't opt for the very first loan option you come across! It's important to take the time to compare loan options from a range of different lenders and weigh up the pros and cons of each option. For example, if one lender is offering a lower interest rate but charges a lot of fees, it could wind up costing you more overall than a slightly higher rate from a lender that charges fewer fees.

How Driva can help you avoid these mistakes

Though these mistakes are all very common, they're also very avoidable. With the help of a broker like Driva, you're able to compare personalised quotes from more than 30 Aussie lenders. The quote process takes less than a minute and won't impact your credit score in any way. You also won't need to worry about hidden fees, as all fees are automatically included in your pre-approved rates (meaning that the repayment amount you see is exactly what will come out of your account each month!).

To get started on your finance journey and find the best loan option tailored to you, head to driva.com.au.

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