Purchasing a car can be an overwhelming situation especially for the first time buyers, where most of them make several mistakes right from picking a car to the financial assistance. These mistakes will affect them financially. Some of the common mistakes car loan buyers should avoid are,
Not looking around
The first mistake car loan buyers commit is not looking around. They stick to the first lender they come across. It is recommended to check for different lenders, compare each and every product and pick the best that suits your requirement. Some of the lenders offer exclusive benefits like free car insurance, discount on fees and charges, etc. These benefits can make so much difference in your total finance amount.
Check: Top 5 car loans in UAE
Focusing only on monthly payments
When you are talking to your lender the only thing you look for is how much it is costing you monthly. This can be the wrong approach. While checking monthly installments, you must also consider the tenure of the loan. Having low monthly installments on a longer tenure cannot be beneficial for you. Life is unpredictable and getting a loan for longer tenures can be risky. Other than this, lenders can trick you by adding extra costs to your monthly installments where it can take less portion of the original loan amount. This will ultimately drag your loan for a long time.
Calculate your Auto Loan using Calculator
Not paying a down payment
Some financial institutions offer 100% finance. Even though this is attracting, there can be some loopholes attached like high-interest rates, etc. Some buyers even though they can afford downpayment, they prefer 100% finance from the bank. Putting downpayment will lower interest rates and also monthly installments.
Not going through add-ons
A car loan may include add-ons like car accessories finance, extended warranties, etc. This will not only increase the finance amount but you will be paying interest on these as well, which ultimately raises the monthly payments. Car loan buyers should make sure that they don’t get anything extra that is not required.
Maybe interested: Buying car insurance: Do’s and Don’ts
Picking a wrong deal
You might get tricked into getting a product that cannot be beneficial for you. There can be a better deal that is available for lower interest rates or some other benefits. You must calculate your car loan payments and choose the one that suits your requirements and fits your monthly budget rightly.
It is always recommended to do your homework before picking a car loan product. Most of the banks in the UAE provide pre-approval of the loan. If you know how much finance you can avail it will help in deciding the car to purchase.
About the author
Nikitha is a Senior Analyst at MyMoneySouq.com. She has been writing about personal finance, credit cards, mortgage, and other personal finance products in the UAE. Her work on Mortgage loans has been featured by the GulfNews and other popular Financial Blogs in the UAE.
