How to get approved for vehicle finance

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How to get approved for vehicle finance

When deciding to purchase a vehicle, there often is a lot of thought put into it. Mainly it would be which vehicle you’re planning on purchasing and more importantly how you’re getting finance. Although cars are a need for many people, cars are relatively expensive and getting pre-selected for a car loan is rather crucial for most South African’s in order for them to afford to get a vehicle. 

There are many authorised financial service providers in South Africa who are there to assist you in financing your car. But because a large amount of money is involved it does make sense that the lender would have to go over a few things before approving you're for financing. If you’re looking into buying a car and wondering how to qualify for car finance read the top tips below which are guaranteed to assist you in obtaining finance.

 

Calculate your affordability

One thing to do when looking at how to get car finance is by calculating how much you can afford. You can either do that manually or use an online affordability calculator which will help you determine how much you are able to afford for a car.

You need to find out how much money you have left after deductions and with the amount left over, that's the amount you need to calculate which vehicle is in your price range. Your deductions would include either rent or a bond, groceries, insurance, credit and clothing account bills, and your subscriptions. Make sure that you have money left afterwards for things like car repairs, petrol, and maintenance.

Having a breakdown of what you can afford is a good document to bring when going to the lender. Your affordability check will show lenders that you’re taking initiative and that you’re well aware of your finances which will help in building a trusted relationship.

 

Have a good credit score

A good credit score is important for everyone as it is your key to getting financed and having to pay a lower interest rate. As we all know that there will be times when loans are inevitable, with everything being so expensive sometimes it’s hard for you to pay for an item such as a car or house out of your own pocket.

This is why it is so important that you keep your credit score in a good place so that when you’re in need of financing it’s hard for a registered credit provider to refuse. Having a bad credit rating won’t only get you a higher interest rate but it might also ruin your chances of getting an agreement at all. If your score is low, try and build your credit up before going to a lender.

A good way of improving your score is to start paying off your debts. Although you won’t be able to pay them all, try and pay off the small debts first and then work your way up. This will ensure that your income to debt ratio is low enough for your vehicle and monthly repayments.

 

Save for an upfront payment

Having a deposit is a great way to get a loan agreement with a lender as it shows lenders that you are responsible with your money. Although having an upfront payment is not required it is an effective way of getting a loan. Not only will it show your responsibility but it will lower your monthly payments as a large amount of money will be already paid off for the vehicle. Whether you pay 10 percent or more it is up to you but in this case, a little goes a long way.

 

Trade in your previous car

If you already own a car and you’re unable to pay an upfront payment then you can always trade in your car and use that money towards your new vehicle. This is a great way to reduce a chunk of your loan amount and can make your loan term shorter.

Or if you haven’t settled the loan on your vehicle you can always use the trade in money to settle that loan before getting a new one. The best way to receive more from your trade-in is to wait for four years or more, that way you have passed your breakeven and you will get more value for your trade-in.

 

Final thoughts

Getting finance can be tricky but it is quite easy once you wrap your head around the process. What your lender needs from you is proof that you will indeed be able to meet your repayment terms and that you’re financially responsible. Once you have that then everything else becomes easier allowing you to have a budget for the vehicle you wish to purchase.

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