Buying advice: Understanding car loans and finance

When buying a car there are a number of options available, personal loans, car loans, secured loans, cash or peer loans. The options available to you will depend on a number of factors. Your credit history, savings, loan amount and loan term are just some of them.

Most people would like to be in a position to be able to buy their car outright with cash. The benefits are obvious; there would be no monthly payments to budget for, the car would be yours from day one and you are free to sell it as and when you please. However for the majority, this is not an option as they just do not have the money available.

A lot of people decide to pay for their cars through financing and car loans can be an ideal way of doing so. If you look around you will find some pretty good deals on car loans. Most of these usually come from the car manufacturers or car showroom dealerships. There are a number of financial deals available including a number of car dealers that will give you 0% interest on the car loan but you tend to have to pay a substantial down payment before you can get it.

The car loans that will be available to you will usually depend heavily on your credit score. A high credit score will give you access to more advantageous car loans. A low credit score means that less money lenders will be willing to take the risk of lending you money as you may have missed payment in the past so they may be concerned you would default on your car loan payments. Many people do not have a poor credit history though so would not find it too hard to get a car loan. Even people with a poor credit history should be able to get a loan though but it may be on different terms and usually with considerably higher interest.

There are also negative aspects of financing your car purchase with a car loan. Apart from the sizeable deposit that could be required, you will be making monthly repayments which could take up a considerable part of your disposable income each month. This is particularly the case if your credit score is not the highest. Furthermore, the car won’t actually belong to you until you have finished all the repayments which could affect the sale of the car should you decide to sell it during the loan period.

There are a number of financing options available, car loans being just one of them. It may be worth contacting a financial advisor to help you make the best decision.

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