Car has become one of the most important transportation options in our times, and so most people own one for their family. However, it may not be possible for all to buy a car instantly due to the lack of finances. This is where car finance comes into the picture. If you are considering purchasing a car and do not have enough finance then you can look in to car finance options available in the market. However, going for a car finance is a major decision because it comes with a huge responsibility to pay back the sum, and so it is crucial to make sure that you consider the below mentioned factors before you opt for one.
- Will you be able to afford the car?
- Will you be able to maintain the car?
- Will you be able to spend on the fuel on a regular basis?
- Will you be able to keep the car in running condition?
- Which car financing options offer you best interest rates?
- Compare the total cost of borrowing of different lenders
- Care should be taken to ensure that the right kind of payment protection insurance is purchased.
- With respect to leasing, a fee will be charged for a default payment.
- The final step
- You need to make sure that payments are made without fail.
- You should shield from any kind of negative financial impact.
- You should maintain an emergency fund in order to ensure that they are well covered in the future.
Some of the finance options you can consider are
Personal loan – The personal loan can be obtained from a building society or a bank. The cost of this loan can be spread across 1 to 7 years in most cases. The monthly repayments can be far greater than many other car finance option but car can be owned and the total amount may work out to be less when compared to other methods. These loans are typically the least expensive method of loans to borrow over a significant long term. So, the person seeking a loan needs to maintain a very good credit rating. If a good credit rating is not maintained, the loan seeker should look out for other methods.
Hire purchase – After paying an initial deposit of around 10%, the loan seeker can pay a fixed monthly amount over an agreed period of time. The ownership of the car is not transferred to the user till the last payment of the personal loan is complete.
Car leasing – This car finance option is very similar to a long-term rental. Here monthly payments are made till the contract expires. The two types of car leasing are: Personal contract hire and personal contract purchase. In this method, the value of the installments is much lower than the other type of options. The only disadvantage is a mileage restriction. In this method, the loan seeker never owns the car and ends up a paying a huge cumulative payment for the car.
Credit Card – The most important advantage of a credit card is the ability of card to cover the full purchase cost and provide extra protection as long as a minimum amount is paid and the monthly card payments are met. The only disadvantage is that some credit card providers charge a certain percentage as a fee.
Peer-to-peer loan – This is the car finance option process where an individual loans out money to another individual through a website. This method can be used to go around traditional organizations like banks or societies that build houses. However, a good credit rate is also very important to be maintained in order to obtain a peer-to-peer loan.