Pros and Cons of Car Loans

Ways to buy a car. Image by -Niloy-

There are many different types of car loans available and you will need to consider each one. The different types have their own pros and cons and it can take some time. But taking the time is worth it when you get to save money.

Common Type of Finance

The personal loan is one of the most common forms of car finance and there are many reasons why. The main benefit is that you can gain lower interest rates by going hrough your bank than you car going through a car dealership. Of course, you need to have a good relationship with your bank to be able to do this.

Have the Car from the Start

Another advantage to taking out an unsecured loan is that you will own the card right from the beginning. If you opt for a hire purchase, the car dealership will own the car until you make the final payment. This can often lead to problems if you run into financial difficulties. Consider the benefits of selling the car if you really do start struggling to make the payments.

Longer Periods for the Loans

Unsecured loans can be taken out for longer periods than a hire purchase or other form of financing. It is possible to take some loans out for 10 years, depending on the amount that you need. This is great for those that need to make smaller monthly repayments or those that need to borrow a lot of money. Most loans for vehicles can only be taken out for up to seven years. Of course, you do need to think about the extra interest that will be added onto a longer term.

No Need for a Deposit

You do not need to put down a deposit for a bank loan, which is one of the reasons many people opt for them. This will help those who suddenly need a new car because theirs has broken beyond repair. However, having some money saved and put to one side will help to keep the amount of loan low, which will help with the interest rates.

Problem of Owing Money

The downside of financing a car with a loan is that you will owe money. If you can save the total up and use it for the car, you will own the car outright without having to owe anybody money. However, this is not always possible.

Limited on the Amount You Gain

 Another problem is that you will not actually get the full amount of the loan that you need. This is especially the case when it comes to a brand new car. However, the car dealership will be able to offer you a hire purchase or a contract for the full amount.

Check Your Credit Rating

Finally, you will need to think about your credit rating. Getting car loans with a bad credit rating is next to impossible – but it can be done. You will need to spend some time improving your credit rating if you want to stand the chance at getting the best APR available. Of course, you can take the high APR and then look at refinancing your loan when you have improved your credit rating.

There are many different types of car finance options and the car loan is just one of them. Take some time to look into every option and then you will find the perfect option for you. Whichever option you choose, always stay on top of your monthly repayments and contact the companies if you run into financial trouble.