Is an Auto Loan a good idea?

Oluwafemi Smith
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Apr 15, 2022

No one wants to be the person who gets splashed on a rainy day after a long day's work; stories like this just look to be a terrible omen, especially if you live in a country like Nigeria, where owning a car appears to be a criterion of success because other local modes of transportation are inefficient.

Unless there are unique conditions, receiving a car loan may never be considered in developed countries. This is because you have an effective and timely form of transportation available to you; therefore, why bother acquiring a car/auto loan?

If Economics did clear drilling on me, one of the things learned would be the understanding of easily identifying a need and a want. In the very words of Adam Smith, human wants are insatiable, therefore the pursuit for happiness is endless, as one would keep adding more wants into the cart, and just like an abyss, it would never fill up.

Let's get to today’s business now, shall we?

Is an auto loan a good idea?

I think I built a foundation of thought for you in the last two paragraphs above, but I think in all fairness, the decision to get an auto loan begins with you being sincere with yourself.

You may need to identify in all sincerity if the subject is a need or a want, and if you have solved this phase, you can then proceed to confirm what your budget would look like, and how you seek to pay back in the best of ease.

Should you want to drive a current car but can't save enough money in a reasonable amount of time, financing a car could be a good solution. In most circumstances, an auto loan's interest rate is low, and the additional costs won't add much to the total cost of the vehicle. If the auto-loan is clear, regular payments will not put a strain on your current or future budget.

Is it preferable to take out a car loan from a bank or a dealership?

From my little experience in the banking industry, I've learned that the bank is never your buddy; they're just interested in maintaining a connection and profiting from whatever you see to be assistance. This means that anytime the bank appears to be assisting you, the bank is assisting itself. However, getting a car loan from a dealership is preferable to getting one from your bank.

The simple truth is that in-house financing companies would provide cheaper interest rates than banks or credit unions. Because dealerships specialise in lending to vehicle consumers, in-house financing would also save you money. For buyers with bad credit, dealership financing may be the greatest option for getting a car and having a less taxing experience.

How do you know if you'll be able to receive a car loan?

It is no hoax that loans have a way they ease up the burden on one since one can spread out payments into bits. Although some of these monthly payment comes with interest, others don't.

So, how can you decide if a car loan from a dealership or a finance firm is right for you? The solutions are straightforward:

Make sure your credit report is in good shape.
Have a stable source of income.
Have proof of identity.
Consider Getting Preapproved.
Have a Down Payment.
Understand How Dealership Financing Works.
Work on Your Credit score before applying.

So, is getting an auto loan a wise option, you might ask? I'll tell you this: a vehicle loan is only as good an idea as the genuine motivation for it, whether it's a need or a want. Whatever selection you make, be sure you have a solid credit score and a steady source of income to see you through not only the planning stage but also the actual car/auto purchase.