Your car is one of the most important acquisitions, after your house. Thus, deciding on a model can be rather challenging, considering the variety of vehicles out there.
Concurrently, you shouldn’t let your enthusiasm overshadow your financial decision; on the contrary, you should concentrate on finding the most competitive loan for your situation.
Determining What You Can Afford
Although you might be tempted to first pick your car, and afterwards think about your budget, perhaps you should rethink the order. Make sure the car you’ve set your eyes on falls within your desired price range. Also, don’t forget to factor in the maintenance expenses, such as insurance, registration fees, roadside assistance, fuel, maintenance, repairs, road tolls. All these costs add up eventually.
You should also concentrate on saving money so that the loan you get is more convenient. Still, if you’re short on money, another option might be getting a second-hand car. There are plenty of good options out there.
Still, make sure you do an ownership check before you purchase a second-hand car. This way, you can be 100 percent confident that the owner doesn’t owe money on it or something of the sort.
About Car Loans
A car loan is also known as a personal loan that is utilised for the specific purpose of acquiring a new or used vehicle. The terms vary, and the lifespan of the loan lasts from 12 months to 5 years.
If your financial situation prevents you from paying the full amount of the loan until the loan comes to an end, the final payment must be sent out as a lump sum. Still, this might mean dealing with paying off a significant sum of money or refinancing when the loan comes to an end.
Fixed and Variable Interest Rates
The key to getting a competitive deal is shopping around. If you do that, you’ll learn that there are two primary categories of home loans: variable and fixed. A fixed rate loan offers an interest rate that is locked in for the lifespan of the loan. Still, if you plan on making additional repayments every now and then, you might be charged an early termination fee.
On the other side, variable interest rate loans are on the flexible side, allowing you to make extra repayments if you have the means to do so. Still, if the market cash rate goes higher, the interest rate will grow, as well.
Secured Loans
When you take out a secured loan, you have to provide an asset, such as the vehicle you’re buying, to act as security.
So, if you don’t repay the total cost of the loan, the lender will eventually repossess the vehicle to compensate for the financial loss. What is more, if the worth of the security asset is less than what you owe, you’ll be expected to pay the difference.
Unsecured Loans
For the most part, unsecured loans are used for the purchase of second-hand cars. While this means you won’t have to provide an asset as security, the amount you may borrow will be reduced.
Nevertheless, since the credit provider takes more risks, the interest rates will be higher. If you won’t make repayments for the loan, the credit provider might take you to court, in the attempt to recover the money.
The bottom-line is that purchasing a car is a fundamental decision in each person’s life. Therefore, you should be sensible about it. Be prepared, do your research and shop around before signing a deal.
