When life seems to be going on the right path, you know it’s time to bid farewell to the old car and get yourself a new set of wheels. This decision come with the tough question of whether you should take a car loan for a brand new vehicle or go for a used one that fits your current budget. Even if you decide to go for car financing in UK, you have options other than loan. However, the question is whether you should take a loan or not.
So, here we will answer some of the basic factors that go into the equation that makes car loan feasible or infeasible for you. First, let’s understand what car loan is and how it is different from car financing.
Car Loan vs. Car Financing
Most car financing and leasing options are provided by auto dealers rather than lenders and banks. Like any personal loan, car loan is provided by a bank or a lender who deals in such matter. It is similar to taking out a mortgage. In fact, you also have the option to take a car loan against your mortgage. However, that will put your home at risk in case you miss payments. So, unless extremely sure about your affordability in the future, do not secure a loan against your home or mortgage. Also, like mortgages car loans have an APR that actually indicate how much interest you will be paying. Monthly repayment amount and APR will determine how much you will have to pay each month. Make sure you can take that amount out despite
Some Benefits to Consider
Taking out a car loan has its own set of benefits to offer:
- For those who already have a huge personal loan such as mortgage, taking out a car loan can be much easier.
- You can get it arranged over the phone or online. It is a more flexible option as you can choose whether you want to borrow all the money or just a fraction of it.
- Similarly, loan period can also vary from 12 months to 5 years. You can choose according to your convenience.
- If your credit score is good enough, you can get a great fixed interest rate that will remain the same throughout the term.
- Car loan also gives you the freedom to sell off the car in case you get in financial trouble during the term. This may not always the case with our financing options.
The Shady Side of the Story
Like every option, personal car loan also has a few cons that may render it less favourable for some:
- First of all, you need to bear in mind that a car loan may impact your credit rating. Be wary of this fact if you plan to apply for mortgage in the near future.
- Car loan process may take longer than other financing option. So, you need to be patient as well.
Take out a car loan only if it suits you. It is always best to shop around and compare various financing options before settling for one.