What Are 3 Ways to Finance a Car?
Not everyone can afford to purchase a car with hard cash in hand. So, if you have finally found your dream car and are planning to purchase it but don’t want to break the bank, getting a loan is the wisest way to go about it. Taking out a loan and paying installments over months and even years frees up your cash flow, leaving you enough money to take care of everyday necessities while still being able to drive your dream car. However, in order to get the right auto loan you need to consider the length of the loan, interest rates, installment fees, and any additional fees that might add up to the final cost. In this article, we will be discussing the three ways to finance a car in Georgetown.
A mortgage, or second mortgage, is a good way to finance a car in Georgetown even though it is uncommon. Compared to the interest rate on your home, the interest on car loans is usually lower and it saves you the hassle of going through extensive paperwork when signing up for a loan. However, when it comes to mortgages, the loan terms play a vital part in determining the final cost of the loan.
For example, if the bank is giving you leverage to pay your loan in small installments with little interest over a period of 120 months (10 years), you might end up paying more than the original value of your car. Therefore, in case you are planning to use your home loan to pay for your vehicle purchase, make sure that you pay back the loan in less than 48 months (4 years).
Pros of Mortgage:
– Lower interest rates.
– Negates the need to apply for an all-new loan.
Cons of Mortgage:
Can only be used to buy older vehicles.
You risk getting your vehicle repossessed in case of default payments.
2. Personal Loan
If you are buying an older vehicle or a car from a private seller, getting a personal loan is the best way to finance a car in Georgetown. However, unlike loans from the bank or dealership, personal loans are unsecured which causes them to have a higher interest rate. Unlike a vehicle loan purchase, your vehicle title has no lien on it which can potentially save you money on your car insurance.
In order to reduce the cost of your personal loan, you can do two things:
– Avoid making the entire payment for the used car from the personal loan. Rather you should use the amount to supplement a down payment that you have saved up to make.
– Before applying for a personal loan make sure that you have a good (ideally, great) credit score. This helps in getting you a lower interest rate and makes the repayment process less expensive.
Pros of Personal Loans:
You can use a personal loan to buy any new or used vehicle from a private seller.
No chance of your car being repossessed by the owner.
Cons of Personal Loans:
– Interest rates are usually very high.
3. Car Loan
The most common method to finance a car in Georgetown is to get a car loan from a reputed dealership. When offering you a car loan, the dealer will usually settle low-interest rates which might make the offer appealing. However, they keep your car as collateral in the form of a lien on the vehicle. This means that in case you fail to repay the loan on time, the financer will have every right to repossess or seize your car.
- A standard car loan comprises the following conditions:
- The cost can sometimes be reduced if a deposit is put down.
- A car loan isn’t usually given for models older than five years (60 months).
- The terms of the loan payment are fixed at either 3 years, 4 years, or 5 years (36 months, 48 months, or 60 months); rarely longer than 5 years, but it has been done.
- You can reduce the cost by trading in your older vehicle.
- The contract can sometimes be structured to include a balloon payment.
Pros of Car Dealership Loans:
- Low-interest rate.
- You can get a car loan from any dealership.
Cons of Car Dealership Loans:
- A car loan can only be used to buy new/newer vehicles (latest models).
- In case of default or missed payments, you risk your vehicle being repossessed by the financer.
Contact Us Today to Learn More About Financing a Car
Buying a car is one of the most important financial decisions that you will make in life. In fact, according to a survey, a car is the second biggest investment in a person’s life.
If you are short on cash, getting a loan is one of the easiest ways to finance a car in Georgetown. Refer to the above-mentioned types of loans and opt for the one that best suits your budget needs.