5 Things To Know About Car Loans

5 2015 Nissan Murano

Whether it’s the car of your dreams or a great bargain you can’t pass up, buying a car can be expensive and chances are you may not have the entire sum of cash resting idly in your savings account, meaning a loan will be required. Taking out a car loan is likely to be one of the more significant financial decisions you make, second to buying property, so here are five things to know as you consider your options.

Dealing With Banks

If you have a good savings history, a solid credit record and long term employment then your bank is probably the first port of call for a car loan. They can offer either a secured loan against your car or an unsecured loan for smaller amounts.

The advantage of a secured loan is that interest repayments are likely to be smaller and the amount borrowed higher.

Banks have a number of criteria they meet before deeming someone a suitable loan risk so it’s a good option for people with an unblemished repayment history and ongoing employment.

Third Parties

Banks may be the obvious lenders but they certainly aren’t the only providers available to finance your loan. A host of other companies like Zoom Car Loans can offer finance for your vehicle. The advantage of such providers is they often offer flexible terms and repayment options and don’t necessarily require a perfect credit history to deem a candidate suitable.

Vendor Finance

If you’re buying from a car yard then vendor finance may be available. Like a secured loan, the finance will be provided against your vehicle. This means they can repossess the car if you default. As with any loan, it’s important to compare the interest rates and check the loan terms and conditions.

Credit Card

If your loan amount is small then using your credit card to finance the purchase of your vehicle is an option, although usually not preferred. This works if the amount required is smaller than minimum loan criteria and you have the sum available on your card. Anyone considering this option should be aware that credit cards attract higher interest rates (often around 10 per cent higher than other loan terms), so you need to commit and pay the sum off as swiftly as possible.

General Information

Any loan you take out is a liability and it pays to do your research first. It’s important to not only compare the interest rate of available loans but also the terms. Then ask yourself: Can you make extra repayments above and beyond the minimum? What are the exit fees should you pay the loan off sooner than expected, and most importantly can you afford to keep making the repayments in the future if your current circumstances change?

Buying a car is one of those exciting moments in life that shouldn’t be overshadowed by the rigmarole of getting a loan. Once you’ve done your research and found the loan that’s right for your circumstances, you’re one step closer behind getting behind the wheel of your new car.