Should I take out a personal loan to finance my new car? Buying a new or used car is not one of those decisions you should make in an instant. Before you go ahead and buy a car, you should sit down and weigh up your financial options.
Financing Your Car With Cash
If you are fortunate enough, you may have enough cash saved up to buy a car outright. However, does that mean this is the best way to finance your new car?
Although it is tempting to use available spare cash to buy a car, it is not necessary for the savviest way of paying for your new car. You have probably worked hard to save up your cash. What if you have just enough cash to cover your car purchase? When you only have enough cash to cover your car purchase, spending it all on your car is not a smart idea.
When you have cash spare, you should bear in mind the “what if” factor. What if you lose your job? Depleting all of your savings is never a good idea.
Taking Out A Personal Loan
A good credit score can help when you need to buy a new car. It is not impossible to take out a personal loan when you have a bad credit rating, but it is often more challenging to do so. But, that being said, taking out a personal loan to finance your new car is not a bad idea. Building societies and banks can help you, however, you should also check out smaller personal loan companies.
Many smaller lenders offer excellent rates when it comes to borrowing money to finance a purchase for a shorter period of time. Before you take out a loan, you should shop around. Too many of us contact our regular lender without exploring all of the available options. Checking the rate of APR is important but you should also make sure you are familiar with the terms and conditions of the loan.
Smaller loans are often arranged over the phone which cuts the down on the hassle factor of taking out a loan. Most of the time, the funds are with you quickly so you don’t have to lose out on a potential deal.
What About Dealership Finance?
Yes, you can use dealership finance to pay for your car, but most garages and dealers do not offer competitive rates. The dealership will probably make money out of your finance deal. That means you can potentially end up paying more for your car during the loan period. Flexible payment terms are often offered, but play your cards right, and you will find most personal loan companies also offer flexibility on the duration of the loan.
Leasing or personal contract purchase is another way to pay for a car. The main problem with leasing is that you will have to stick rigidly to the terms. For instance, you may find a mileage restriction clause is included in the contract. This means you can only drive the car for a certain amount of miles per year.
Ultimately, taking out a personal loan is the best way forward. Don’t forget to add on the insurance that covers you for things like loss of employment or illness.