A car is so much more than a metal box on four wheels. It is someone’s identity, passion and love. Sure, it is about transportation, but it says a lot about a person’s personality as well. This is why you need to know about the different types of new car loans that are out there so that you can get a vehicle that is truly a representation of you (and your budget!).
Money, Money, Money
You need to know exactly how your finances stand before you shop for a loan. Know how much you could reasonably put down for a car and know how much you could afford a month to pay it back. A car is not worth getting into financial difficulties over.
Lots of Options
There are so many different types of loans out there that you could feel slightly overwhelmed. This is why, before you go shopping for your car, you need to do your research. This will also put you in a better position to negotiate with your dealer.
Financing Through the Dealer
Many people think that if they finance through the dealer, they will get the best deal. After all, it means there is no middleman. This isn’t necessarily true, however. While dealership finance is convenient, it is often a lot more expensive because of high interest rates.
You can also apply to an independent financial institution, such as your bank, for a personal loan. You can spend this money any way you see fit, including on a new car. However, personal loans are generally only available to those with good credit.
Leasing is an interesting financial construction, because you don’t technically own the vehicle. Rather, it is closer to long term rental, with the option to buy after a period of time. Leasing is usually only available to business owners or employees.
By far the most popular option for people looking to finance a new car is to apply for a specific car loan. This is like a personal loan, only you will never see the money as it will go straight to your dealer. They are available to people with bad credit, because they carry higher interest rates than personal loans, and because they are secured on your vehicle. They can often be applied for online.
How to Choose the Right Loan
What you need to do is compare the different elements of each of your options so you can determine the best value for money. Some of the elements to compare include:
- The loan term.
- Interest rates.
- Special clauses.
- Charges and penalties, including early repayment charges.
Owning a car is a real dream for most people. However, you have to be certain that your dream doesn’t turn into a nightmare. Make sure, therefore, that you don’t get yourself into unmanageable debt. After all, you want your car to say positive things about you, not that you are in a world of financial difficulties.