Buying a New Car: Is a Personal Car Loan Right for You?

*Guest Post

A car is more than just a useful way to get around. It’s a statement about your personality, and a solution that helps you to continue enjoying a specific kind of lifestyle. Without a car that runs efficiently, you might struggle to get much done. After all, many professionals today need a car to make sure that they can get to work on time every day, and run important errands like picking up groceries.

Unfortunately, most of us simply don’t have the money required to pay for a car hanging around in our back pockets, or taking up space in our bank accounts. That means that if you want to make sure that you can take advantage of the comfort and convenience a new car can offer, you’ll have to begin by considering your personal financing options.

What are Personal Car Loans?

A personal car loan is a type of personal financing that is often regarded as one of the cheapest ways to purchase a car. This is particularly true in a time when personal loan rates have plummeted downwards over the years.

If you’re buying a new car, or even a used vehicle, and you need to borrow money to afford the investment, then there are two options you can choose from if you want to make sure that you own the vehicle when you’ve finished making payments. A hire purchase deal is one option, and a personal loan is the other. Personal loans are typically more popular than hire purchase agreements, as it makes life much easier. With a personal loan, you can turn up to a dealership having already arranged your finance through a bank.

With a personal loan, you can even take the time to make sure that you’ve gotten the best possible deal by looking at APR rates and more. Remember, when comparing personal loans – don’t just look at the interest rate. You’ll need to consider the full APR rate to make sure that you’re accounting for all of the additional expenses that can go into taking out a loan.

How Do Personal Loans Work for Buying a Car?

If you decide to use a personal loan to help you purchase your new car, you’ll need to begin by finding a car that you want to buy. That will help you to determine how much you need to borrow. Remember to keep your ambitions realistic when it comes to looking for a vehicle. Ultimately, you need to choose something that is cheap enough that you can afford to make your personal loan repayments each month, while still getting the job done.

Once you’ve found a car that seems to fit with your budget, you’ll need to approach a bank or building society to ask for a loan. With a personal car loan, you’ll borrow a fixed amount of money, and then you’ll be asked to repay the amount you’ve borrowed through a number of monthly repayments that take place over a period of about one to five years. The interest rates that you can expect to pay will vary depending on how much you want to borrow. In some cases, you may find that the more you want to borrow, the lower your interest rates will be.

One important thing to remember, is that when you’re taking out a loan, you should be aware of the “representative APR”. In other words, the loan price that you see being advertised online might not be the APR that you get. A representative APR only needs to be awarded to 51% of the people that apply for the loan. That means that 49% of people often get a higher rate. It might be a good idea to speak to the person you’re thinking of taking the loan from in advance, to find out exactly how much you can expect to pay.

Pro Tip: Use your Credit Card Where Possible

Whether you’re getting a personal loan to pay for your new car or not, it’s a good idea to make sure that you pay at least some of your deposit on a credit card – even if you have the money to pay for it in cash. This will ensure that you have access to something that’s known as “Section 75” protection. In other words, you’ll be protected if anything goes wrong with your vehicle further down the line. This is because your credit card provider takes on joint liability with the dealer.

The good news with a personal loan, is that by the time you’ve finished making your repayments, your lender will mark the loan down as being settled on your credit file. That means that the car will belong to you, and you can do whatever you want with it!

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2 Responses

  1. When I was looking for a car loan, I found a great rate with a credit union (~1.5%). They often have lower rates than banks.

  2. Steveark says:

    Why not buy a really cheap old used car and let it be a statement of your personality that you are mature, going to win financially and aren’t going to be a typical broke person desperately pretending to be successful?

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