If you are buying a car then the chances are that you will need to borrow money in order to do so. Many cars are too expensive for most people to afford without having to borrow the money to pay for them. This means that a loan is likely to be the only option for many people. Finding a loan though is not always easy and it is important to find the right loan for you.
Low Interest Loans
Many people will immediately start searching for the loan that has the lowest interest. This is because they will feel that will be the best loan for them as they think that it will be the cheapest. It is important to not only be aware that the lowest interest may not be the cheapest but also that it may not offer the best value for money.
A car loan is usually offered by a garage or dealer specifically for buying a car with. It is a very convenient way to borrow money as the dealer will know what you need to borrow and can help you set it all up. Sometimes the dealer will even give you a better rate on the car if you take their finance deal. You may even find some dealers that offer interest free credit.
You may be paying for the convenience of a car loan from a dealer though. If you compare the rates of car loans with loans that you can get elsewhere, you will often fond that the rates are higher, meaning that it is more expensive to get a loan from a dealer than a bank. It is important to check this carefully and compare like for like. For example, do not just look at the advertised percentage rate as there could be other costs and how long the loan is for with also be a factor. It is much better to either compare the AER which is a percentage that includes fees or find out how much you will repay during the term of the loan. Then you can compare them properly and see which will actually be the most expensive for you to take out.
You may see an interest free loan at a car dealer and feel that this is the best deal and that you should get a car from them because of this. However, you should be really cautious if you are considering doing this as it may not be as good as it looks. Firstly, the cost of the finance will be included in the cost of the car. If you compare the price of the cars with those at dealers that do not offer free finance deals, you are likely to find that the ones being sold at the dealer offering free finance are significantly dearer. Even if they are not dearer there may be other costs that are higher. For example, if you miss a repayment on the loan, you will get charged and this amount will differ between lenders. You may think that this will not matter because you intend to repay your loans. This is great and you need to do this, but it is wise just to check how much this will cost you so that you are prepared and it may help you to decide between lenders as well.
It is possible to use a personal loan to pay for a car. It can be worth looking at these and any other loans that will give you enough money, to see if they are cheaper. You may find that you will be able to get a better deal, perhaps from your bank or another financial provider. It is good to compare a lot and see which looks to be the best. You may find that for some loans you will need to use your home or car for collateral, but with a car loan through a dealer you will normally have to use your car as collateral anyway.
Make sure that you check, as mentioned before, exactly how much you will be expected to repay so that you can calculate how much the loan will cost you in monetary terms. This will allow you to compare them properly and work out whether a car loan will be better or whether you will be better off using a different type of loan. It will take time to do this comparison, but it will be worth it. You could save a significant amount of money if you take a bit of time to do the research required. It could make a big difference, even if your repayments are a little lower each month, it will enable you to be able to save some money and find the repayments easier to manage.