Today, a large percentage of new car purchases are made through auto loans. Ultimately, everyone wants to get the best auto loan financing.
But how to do that? how to have a good interest rate for car loan in Kuwait? and how can you acquire a fast and efficient car loan calculator?
Purchasing a car can be an exciting and nerve-wracking experience. It is usually a big expense, given the impact a new car could have on your life, it is an event that deserves a lot of research.
How to best finance this purchase is the most common challenge. But just how can you do that? With many banks and financial companies offering auto loans financing at different terms, buyers should learn how to shop around for the best car loan deals to maximize the value they get for their money.
Thankfully, new technology is now solving this problem. Indeed, there is a bank and loan aggregation app that make the car loan process super easy while providing customers the ability to get access to offers in the same place, besides providing you with an efficient auto loan calculator.
FinFirst Capital Super app Capital the winner of the global Seedstars competition offers a fast, secure and easy marketplace.
“FinFirst App facilitates banking, financial services, and loan processing from anywhere, at any time and instantly matches users with the best providers” – Times Kuwait
This pioneering platform is a first-of-a-kind for the region, allowing highly customized access to a wide range of financial services, including auto loan financing,as well as of digital car showroom.
In this article, we will cover the following:
1- Factors Affecting Interest Rates
2- Factors Affecting a Car Loan Agreement
3- Shopping Around for Good Interest
4- Better Terms FinFirst Loan Matching Application
First off, what is a car loan? In essence, a car loan is money you borrow from a bank or another financial organization to purchase a car. The bank or financial organization acts as the lender, and you as the borrower. These institutions charge interest on the loan and you pay the principal and interest amount over an agreed period of time.
Moreover, the borrower has to make monthly repayments until the full amount of the loan (principal plus interest) is settled. Importantly, the interest rate that banks charge on car loans represent their perception of the risk of handling the transaction. Though banks advertise a representative APR (annual percentage rate) for the car loans they offer, only about 51% of lenders get accepted for the advertised APR.
There are certain factors that banks, financial companies, and other auto loan financing organizations consider to determine the interest rate applicable to every borrower.
To understand how to get a good interest in your car loans, it is essential that you know the factors that determine the interest rate the bank will charge you.
Factors Affecting Interest Rates Below are four fundamental factors every lender will consider when deciding on an interest rate.
A down payment is an amount you are willing to pay in cash for the value of the car. When you have some available cash for the down payment, it reduces the loan you need from the lender. However, another added advantage is that down payments can reduce the interest rate on your auto loan. The fact that you have some cash to pay gives the lender a higher level of confidence in your ability to repay the loan going forward.
The loan term is the number of years (or months) it will take you to repay the loan. Put differently; the loan term is the duration of the loan. When the loan term is longer (say five years), your monthly payment will be lower. On the other hand, when your loan term is shorter (say three years), your monthly payment will be higher. However, a shorter loan term will reduce the interest you pay on the loan. In other words, the loan term does not affect your interest rate (directly), but your interest payments.
Let’s take an example: If Mr. A gets a car loan of 10,000 KD with a 5% interest rate and a loan term of 5 years (60 months), the monthly interest payment will be 39.2 KD. If Mr. B takes the same loan, but with a three-year term, the monthly interest payment will be 37.34 KD. Income and Debt Your income and debt will also determine the interest rate the lender offers.
Lending organizations use the debt to income ratio to measure the risk they are taking up by lending money to an individual. In Kuwait, the allowed DTI is up to 40%. If your DTI is high, lenders will charge a higher interest rate. Typically, we would expect a new car to have a higher interest rate compared to a used car. But this is not the case. When we think from the lender’s perspective, we’ll see why the opposite is true. Since a new car is more valuable than a used car, banks can get a higher value should they have to repossess the vehicle and sell it off. Put simply, new cars are less ‘risky’ to the bank. Therefore, new cars will have lower interest rates compared to used car.
While the interest rate may be the most significant factor in an auto loan financing transaction, other factors affect the desirability of a car loan. Below are some of them.
The approval process can be long (and tedious) or short. This will impact the time interval between the submission of a request and your access to the money. A faster approval process is better than a slower approval process, all things being equal.
This is the period between the date you purchased the car and your first monthly repayment. Some lenders have a month grace period while others have up to four-month grace periods.
You need to be aware of any other extra charges like registration and management fees. The lower the additional expenses, the better.
One way to shop around for best auto loan in Kuwait is to look at the websites of popular car lenders and compare them in terms of the above-listed factors.
A Better Way to Shop Around Instead of going from one website to another, wouldn’t it be great to have a centralized place where you can view the rates and terms of multiple car lenders?
FinFirst’s financial matchmaking platform makes this possible. With the FinFirst Super App, you can say goodbye to personal visits and long application processes.
Besides auto financing and car insurance, our platform allows easy access to a wide range of financial products, including:
Business loans – Bank accounts – Investment funds – Life insurance – Personal loans.
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