Getting a loan is just the start of a long relationship with your lender. Car finance takes years to complete. Some might be able to manage full payment within a year but most will take three to five years. You want to make these years as stress-free as possible. It won’t happen by sheer luck. You must plan for it and create a system that will help you fulfill your obligations without issues. The last thing that you want to happen is that you default on your loan and trigger repossession. The following may help in avoiding such a fate:
Buy a Car that You Can Comfortably Afford
A lot of people make the mistake of biting more than they can chew. While most lenders will try to prevent this, it is ultimately the borrower who needs to take responsibility. You need to be realistic with what you can afford. For example, a $5,000 monthly income isn’t enough for a car loan that requires $5,000 monthly payments. After all, you will need to pay for rent or mortgage. You will also have to take care of utilities, groceries, credit card bills, and other expenses. If you take all of those out, then you might be left with just $2,000 or so. Maybe you could allot $500 to car finance while the rest goes to your savings, investments, and other purchases.
Build an Emergency Fund for Unexpected Hardship
Indeed, savings is an important part of the puzzle because you can never tell what could happen in the future. Help yourself through unexpected hardship by building an emergency fun. If you are single, then you might want to make 12 months worth of expenses as your target. If you are married or living with a partner, then you might each have 6 months worth of expenses in your respective savings accounts. This can save you in case you get severely ill or you lose your job. It buys you time to recover without having to lose your car, your house, or any other asset because of unpaid loans.
Take Good Care of the Car to Avoid Expensive Repairs
You can also make life easier for you by taking good care of your car. Repairs can be expensive, after all, so just avoid problems as much as possible. Follow the regular maintenance schedule. Put your car in a covered parking spot whenever possible, especially when there’s a lot of snow or rain.