Buying a car is an exciting time, but you should be careful not to get swept up in the excitement. It is a big commitment, one that will cost you a lot of money. You should do your best to find the right car, and the right financing for it. Purchasing an automobile is no simple decision. Of course it is always best to use your own money for a car. It is the cheapest way to purchase any vehicle because you won’t pay interest on a loan or finance agreement. Either way, if you choose to finance or not you should have enough savings to make sure you can afford the car.
When you don’t have quite enough cash to buy a car, using a personal loan is probably the cheapest way to finance it. You have to have a good credit score, however. A personal loan from a bank, building society, or finance provider can help you spread the cost or purchasing a car for up to seven years.
It is key to make sure that you make sure your loan is not secured against your home or you will be putting your hose at risk should you fail to make repayments on time. Furthermore, shopping around for the best interest rate is key. Compare the annual percentage rate (APR) and other charges you have to pay on top of the interest.
Pros of Personal Loans
In addition to personal loans being the cheapest alternative to buying a car with cash, personal loan scan typically be arranged over the phone, on the internet, or in person. They will usually cover the whole cost of the car, although you don’t have to do that. You can get a competitive fixed interest rate if you do your homework and shop around for the best loan.
Cons of Personal Loans
According to the specialists at the site MoneyPug, which is used to find car finance deals, although personal loans are the cheapest method for financing a car, they do have disadvantages. You may have to wait for the money to be deposited into your bank account, but some make it available immediately. Your credit score will be affected. You will likely not be able to borrow other funds right away. Monthly costs could be higher, and interest depends on your credit score and the lender.
Other Options for Car Financing
Another option for financing is the personal contract purchase, or PCP. This is best for people who like to change their car regularly and want low monthly payments. A PCP is basically a loan that will help you get a car for a while. Unlike a normal personal loan, you won’t be paying the full value of the car and won’t own it at the end unless you choose to buy it. This is essentially leasing a car, and it is perfect for those who don’t mind not owning the vehicle in favor of low payments and driving something new.
A third option is Hire Purchase (HP). When you use this method, a loan is secure against the car, meaning that you’ll need to pay a deposit of around 10 percent before making monthly payments over a pre-determined time period. You won’t own the car until the last payment is made, but this is okay for a lot of people who are seeking longevity. While HP agreements are typically arranged by the car dealer, they usually convenient and competitive. Advantages of HP include that they are quick and easy, with a low deposit, flexible repayment terms, and competitive fixed rates. On the other hand, the drawbacks are that you don’t get to own the car until you have paid it off and it tends to be more expensive for short-term loan agreements.
While personal loans are the cheapest way to finance an automobile, it depends on your situation. It also depends on what you want out of a car and a car payment. Learning more about the nuances of a car finance loan will lead to a decision. Just be patient and know what you are getting into. The rest will unfold naturally.