Financing A Car Purchase
Whether you are looking to buy a new car, replace an old one or are on the lookout for your very first car, there are various finance options available.
Unless you have the cash up front most people are required to obtain a car loan. By shopping around, and comparing interest rates plus terms and conditions from the many lenders out there, a little forward planning will go a long way to ensure you get yourself the best available deal in car finance.
If you are buying a car from a dealership do not feel pressured into taking out their finance as it may result in being the most expensive option for you. The best choice would be to take out an independent car loan that offers competitive rates and in addition gives you the freedom to make a purchase from anywhere you choose, whether it be from a dealer, a private sale or simply from someone you know i.e. friend or family.
The majority of loans taken out for car purchases are considered ‘personal loans’ which are not secured. An unsecured loan means that you are borrowing money without having to put anything up for security, such as your home, against the loan amount. There are so many lenders offering unsecured personal loans ranging from banks, building societies, brokers and online finance companies.
Many mortgage holders prefer an unsecured loan as an option as they may feel reluctant to add any further debts to the security of their home. An unsecured car loan generally involves a quick completion process and those who do not own their own home will find an unsecured car loan perhaps the only real option.
However unsecured car loans do have their disadvantages. In general an unsecured loan will carry a higher interest rate that is often fixed throughout the term. This can result in more interest being added to your debt should you take out this type of loan during a high rate period. Also an unsecured car loan will typically offer a lower amount available for borrowing and depending on your personal circumstances the interest rate you initially see may very well not be the one the lender actually offers you.
On the other hand you may consider a secured loan, also known as a homeowner loan, to finance your car purchase. Contrary to personal loan a secured loan is one that is secured against an asset, in the majority of cases your home. It may have a longer processing period due to proof of home ownership checks and property valuations, but a secured homeowner loan will offer far more competitive interest rates resulting in lower monthly repayments set over a longer period of time. As a homeowner loan is secured against an asset your borrowing power is likely to be much higher than an unsecured loan; however the amount you can borrow is determined by the market value of your property minus any mortgage or other loans currently secured upon it.
A secured car loan can also work for those with a bad credit rating. Many lenders will offer bad credit loans providing you have an asset secured against it. Those with bad credit history who do not own their own property will find it very difficult to obtain a loan if they suffer from adverse credit.
If you need to finance a new or used car Apply Now for a free quote. Compare 100's of loan products quickly and hassle free right here at the MoneyOutlet.
Published on October 17, 2007
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