Loan Documentation Preparation For Your Next Car Purchase

by admin on March 25, 2014

A down payment is usually required if you plan to finance an expensive item such as a vehicle or another asset. As a rule, the interest rate is lower if you make a sizeable down payment. The term varies, depending on whether you apply for a new or used car loan. Borrowers who opt for a longer repayment term benefit from affordable monthly payments, but they pay more in interest in the long term, which increases the cost of borrowing. If you are self-employed, you may have to present your individual income tax returns and other documents. car-keys

Make sure you bring the required supporting documentation with you. Banks review loan applications to make sure that applicants are regular payers and creditworthy borrowers. Car loans in Canada are offered for the purchase of new and used vehicles. There are different options for customers, including leasing and buying a vehicle.

Bank customers are offered financing for the purchase of motor homes, sports vehicles, cars, campers, and RVs. Customers who want to secure a lower interest rate apply for secured loans which are safer for banks. The vehicle to be financed serves as collateral, and the bank can repossess it in case of default. An unsecured auto loan is another option whereby collateral is not required. The terms vary depending on your credit score and type of vehicle, e.g. car, ATV, snowmobile, jet ski, etc. Generally, your credit rating is the most important factor for banks. Customers with a good credit score are offered plenty of options. You may want to apply for a secured loan if your credit score is less-than-perfect. A family member, parent, or friend is your first choice if you apply together. Another option is to apply for a loan through a car dealership, but the interest rate is usually higher compared to banks and credit unions.

The interest rate also varies depending on the repayment term, i.e. 36 months, 48 months, 60 months, etc. The borrowing limit is also an important factor.

Traditional and non-bank lenders offer car financing. You will be asked to sign the loan documents once your application has been approved. Some financial institutions offer online calculators to compare different loans. Enter the start date, term, interest rate, and any extra payments. Customers also benefit from insurance and tax estimates.

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