7 Different Loans To Consider Before Buying A Car
Buying a car is an exhausting process. A car is a necessity nowadays. You need it to drive to work, especially if it’s a long distance from home. When you have your vehicle, you can also build your livelihood around it. But, getting a car is not that easy because it costs money. Still, you might be able to afford a car loan. If you’re looking for options, the following might be for you:
Secured Auto Loans
Secured loans tend to lean more on the lender’s benefit, which is also why they carry lower interest rates. Banks and private lenders offer secured loans. They, however, are within rights to repossess the car if you fail to make regular payments. That’s the law of secured loans because a lien or collateral must guarantee them. The only way you can fully get the car is to repay what you owe. That breaks the right of the lender to repossess your vehicle. To avail of a secured loan, you must also have a good credit standing, which may be difficult for some consumers.
Business Loan Or Auto Loans
If your business revolves around vehicles, you may want to expand and add another car to your growing fleet. There are many loan options available for you, and you can get a business loan for buying your next car. You can use the loan to purchase a brand new or refurbished car with automatic debit payment options for your convenience. Credit unions also offer business loans to employees and their family members.
Commercial Hire Purchase
This is another loan solution wherein the lender purchases the vehicle on your behalf. The lender then hires the car for you within a contracted period. It means that the lender owns the car for the time being until you’re able to make the complete repayment of the loan. The car can become yours as long as you’re making regular monthly repayments. Commercial hire purchase loans are also applicable to businesses requiring heavy machinery, construction equipment, commercial vehicles, and computers.
Unsecured auto loans are rare because the lender only relies on the borrower’s good character to repay it regularly. It comes without any collateral. You might be able to get unsecured loans if you have an existing relationship with your bank, credit union, and online lenders. Another benefit from this loan is that the lender cannot repossess your vehicle even if you fail to repay the loan. The car is not collateral, and that’s why unsecured loans are uncommon. The lenders can still report you to the credit bureaus if you choose to default on your payment.
If you find this type of loan interesting, consider first if you have a good credit score and the budget for it. The high-interest rates can break you if your income cannot support living expenses and loan repayments.
In-House Car Financing
Banks and private lenders are not the only choices for auto loans. There are car dealerships that offer auto loans for your convenience as well. But, these dealerships also tend to work with outside lenders, but it’s easier to get approval through this option. You’ll pay your loan directly to the dealerships. Because they want your business, the dealership will customize terms to suit your budget. In-house financing offers flexible rates, more warranties, and the advantage to build and repair your credit history. . It’s another way of financing a new or used car by deducting the payments from your pre-taxed income. The arrangement must be approved by your employer and is often called as salary sacrifice. It’s your employer who leases the car from the dealership, but you’re responsible for the registration, servicing, and insurance, among other things. Upon leaving the company for whatever reason, the responsibility still lies with you. You must inform your new employer about the lease agreement to continue making repayments.
With the operating lease option, the financier or lender buys the vehicle from the dealership. The lender then rents it to you, which means you’re still not the car owner. It’s considered an off-balance-sheet-financing because the lender cannot add the leased asset and future payments to its financial sheets. Because you’re only renting it, the risk of ownership doesn’t apply to you. Upon the end of the lease term, you can choose to continue renting the car, buy it, or change vehicles.
There are options available to you if you do want to own a car. But, you need to realize that these options also come with terms that may or may not be to your liking. The best possible choice is to go with the loan that you can suit your budget. Consider your lifestyle as well as what type of car you need. Remember to live within your means and to examine the pros and cons of each loan type. A vehicle is within reach as long as you’re not trading your peace of mind.