If you have applied and been approved for vehicle finance, your lender should have abided by responsible lending practices. This means that they have taken into account your current financial situation, expenses, and income to make sure you have the capacity to repay for the life of the loan. Your expenses can fluctuate over time, but it is assumed that you will continue an average spend during a loan term, however, it is also expected that you are taking the steps to keep up your repayments while also paying your other bills.
Make a budget
This is our number one rule when considering any finance. Before you look at applying, look at your current expenses and start the process of budgeting. If you currently live paycheque to paycheque, a loan may not be realistic. You would need to make considerable changes to your current financial situation and ensure that you will still end with a surplus at the end of each pay cycle once loan repayments begin. Going from a $0 bank account to $500 extra every month isn’t something that can necessarily happen overnight. Take three months to better your spending and bank account to then start looking for finance.
Learn to survive and thrive
Being able to survive on your current paycheque is essential. You mustn’t hold out for a future bonus or pay rise. As previously mentioned, drastically cutting expenses shouldn’t be an overnight process. If you do, then you may find yourself in a worse financial situation than you previously were. Remember, you probably don’t want to be living on the smell of an oily rag for the life of a loan just so you can make your repayments. Be responsible and realistic in your application loan amount and you should be able to keep your current lifestyle and have a new car to get you from A to B.
Pay your bills
Many believe that if they throw all their money into one debt that the others will miraculously disappear. Unfortunately, this is not the case. To maintain your credit rating, you must pay all your bills and stay out of unattainable debt. If things go south with your income or budgeting, organise for smaller payments rather than none at all. Many businesses would prefer to help you maintain a payment history rather than rid it completely. A partial payment is still a payment after all – just don’t rely on this.
Account for all expenses & hardships before application
Your financier should take the steps to ensure that you have the capacity to repay, but you should also do the ground work yourself before application. This way, you avoid having listed declines on your file should a lender find you inappropriate for a loan. You should take into account possible hardships you may suffer over the course of a loan and establish a solid emergency fund should you run into unexpected expenses. The last thing you want is to be juggling debts when you are halfway through a loan and no way to pay them.
Ensure your loan is right for you
Time and time again, borrowers are desperate for finance should they be without a mode of transport. Therefore, they may be more inclined to accept any finance offered, no matter the interest rate or additional fees they may be charged. Remember that just because your payments are broken up doesn’t mean you are paying any less than the end amount. It should be affordable and attainable, especially taking into consideration your current expenses and any dependants you may have.
Budgeting your expected finances effectively should lead you to a successful vehicle loan. A loan should not break the bank, and if you are in the market for a new vehicle, get the calculator out and start budgeting your way to a successful financial future.
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