Car Financing Options: What You Ought To know
Are you planning to purchase a car? Well, car markets are large with each car brand bearing a different price tag. But there are options you can choose when purchasing a car. Either you take a personal loan or car loan as your financing option. If your pocket favors you, you can buy the car from your savings. However, most people need loans to do the same, provided you meet lending requirements. You need to understand that a car loan is strictly for buying a car, while a personal loan for any purpose. So, what’s your financing option when it comes to buying a car?
Personal Loan
A personal loan enables you as the borrower to get funds from a lending foundation. Mostly, they will lend you money from a bank in a lump sum. You can use the money on numerous options like home renovation, birthday party, and more. However, you can still use the personal loan on a vehicle, or home. The lender will seize your assets as collateral in case you fail to pay back the loan. For this reason, most people prefer unsecured loans.
Interest Rates
Unsecured loans as your financing option to buy a car attract a higher interest rate. But secured loans have much lower interest rates due to the collateral attached. An unsecured personal loan means more strict approval requirements, therefore, have a good credit score. This will boost your borrowing capacity, as well as lower your interest rate.
Terms
With personal loans, you will be issued a set repayment period. This may range from 12, 24, to 36 months and more. If your loan period is longer, you will pay a low monthly fee. However, this will end in more interest payment the whole of your loan duration. But when your loan period is shorter, the monthly payments will be higher. It doesn’t matter the repayment method you choose, provided you can get the car, and pay as per the agreement. Most likely your lender will accept your online application for a personal loan. This is usually on the spot at a car dealership.
Car Loan
A car loan is for the car you intend to buy. So, the vehicle as collateral for that loan. But what if people scrap my car? Scraping a car that has outstanding finance means you will settle the outstanding debt to own the vehicle, or repair the car and use it for the financing duration. Another thing is to get a buyer who will settle your outstanding finance. Defaulting on your payment gives the lender authority to seize your vehicle.
If you are planning to purchase a new vehicle, go for a dealer-financed car loan. Most people love it because it’s fast and convenient. But if a personal loan suits you, go for it instead. Also, before you take a car loan, ask yourself certain questions. For instance, what will happen if I scrap my car which is under loan payment? How long will I pay the loan? What financing option do I prefer? What’s the interest rate, and more.