Choosing the right finance for your next car can have a huge impact on how much you pay for it. There are several different options available to you, so it pays to understand what they are before making any decisions. The more informed you are, the better chance you will have of getting the best deal possible.
Here we take a look at five of the most popular finance options available:
1. Cash
The simplest way to finance your next car purchase is to pay with cash. Using the money you have saved up yourself means that you won’t need to worry about making any repayments or facing hefty interest charges. However, paying in full right now could mean missing out on a good deal by not haggling for a lower price. Also, you might not be able to afford to purchase a vehicle outright, so a loan may be your next best option.
2. Secured car loan
These customers can borrow money by putting up their car as security, which means they stand to lose their vehicle if the loan isn’t repaid in time. Secured car loans tend to come with lower rates than unsecured loans, and they are best suited to newer cars. If you have a car that is worth more than the amount you want to borrow, then this might be the way to go. However, for drivers with older cars, an unsecured loan or personal loan may be a better choice.
3. Unsecured car loan
Unsecured loans allow people to borrow money without using their car as security. The borrower must, however, provide a deposit (usually around 10%) and may need to prove they can afford the repayments each month. Unsecured loans generally come with higher rates than secured ones.
If you’re interested in either a secured or unsecured car loan, you can check out Driva online car finance to compare all of your best car loan options.
4. Personal loan
This is usually taken out by people who want to spend the money on something other than a car. A personal loan lets you borrow the total amount of your deposit and use it for whatever you like, including buying clothes or household items. Personal loans are not used specifically for purchasing cars, so they can come with high rates – although these may drop when you have a good credit history. Personal loans are a good option if you’d like to borrow money to use for both the cost of the car as well as the ongoing costs involved with owning a car.
5. Credit card
Alternatively, you could get a loan on your credit card. However, although credit cards make it easier to spread repayments across the year (which can reduce costs), using them for car finance usually comes with strict terms and high-interest rates – meaning they should only really be used in emergencies.
Before doing anything else, you need to find out what kind of finance you can get and for how much. Your credit rating will play a big part in this, so it’s best to check it before you begin your search.
