Before You Commit to a Car Loan
“Banks require the very same budget that you drew up when you started your car-buying journey,” says Simphiwe Nghona, CEO of the Motor Division at WesBank.
“When filling in a car finance application, you show the banks how much you earn and what your expenses are, to arrive at a disposable income figure. This prevents banks from granting you credit that you can’t afford – which helps to keep your credit record intact.”
A personal budget is the first bit of the finance application process, and needs to be accompanied by supporting documentation. This includes supplying three recent payslips and bank statements, proof of residence, driver’s license, and a copy of your identity document or passport.
These are used to help banks ensure that you are who you say you are – thus preventing fraud. Without these thorough checks, any criminal who has only a few of your personal details could apply for finance in your name.
Once you have all of your paperwork ready, you can apply for car finance at the dealership. There, you will be assisted by a Finance and Insurance (F&I) representative, who is legally bound to give you solid, unbiased advice according to the Financial Advisory and Intermediary Services (FAIS) act.
Dealers will take your finance application and supporting paperwork, then submit it to all the banks. You will receive multiple quotes, one from each bank, for the vehicle you wish to finance.
You’ll be able to compare the rate and choose the deal that best suits your budget. If you do not qualify for finance for a certain amount the F&I representative will be able to walk you through the process and assist you in arriving at a more suitable budget.
It’s important to note that any quote you are given is not set in stone. You are still able to structure the deal as you see fit – the WesBank website has calculators that you can use to play around with your budget and see which structure you can best afford. This includes being able to add a larger deposit, and increase or decrease the contract period.
In some cases you can also negotiate on the interest rate for the deal – though this remains at the bank’s discretion.
Finally, just as you should provide an accurate breakdown of your affordability with your finance application, you should be absolutely certain about what you choose when deciding on the structure of your deal.
After you’ve signed it and taken delivery of your car, you cannot change the terms of the contract.
“Being honest with yourself, as well as the bank, will help you make the right choice,” says Nghona.
“Always ask yourself whether you are happy, and able, to make those large monthly repayments for three to five years. You can always back out of an application, so don’t be in a rush to commit to a car you can’t afford.”
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