Need a loan to purchase a car? You should look for the best financial options. The other important factor to look at is the best deal that will give you the set of wheels that you like.
Buying a brand new model vehicle is very exciting. When arranging for a car finance deals, you have to look at the cost of what you’ll need to cover. Most people usually spend a lot of time as they compare different car prices. However, if you decide to pay over the odds to borrow money for buying a car, it easily wipes out the reduction that you will get for the price you will pay.
You might end up paying high odds so you should understand the different options offered and their rate of interests.
Factors to consider before getting a car on finance
When going for a car on finance, you need to think about these factors.
-Monthly affordability – Charges and their interest rates associated with the contract -The amount required as an upfront deposit – Providers mileage limits
The best thing is to ensure that you have checked your credit score even before you apply for a car finance contract. Below, is an explanation of the different types of car finance:
Hire Purchase Plans
Here, you will require an upfront deposit and then make commitments on paying monthly installments. After you have paid all the installments, the car is yours according to the agreement.
If you have fallen behind with repayments, or you have not cleared a third of the required amount, the car finance provider gets the rights of repossessing your vehicle. After the vehicle has been reclaimed it can be auctioned, and the money will clear your debt and accrued costs. When the money they get is not sufficient, the outstanding debt becomes your liability.
This low-rate loan is much better than purchasing a car on hire purchase agreement. With this loan, you can sell your car and pay the mortgage. However, depending on the financier, the rates are often low.
Sometimes you might require a higher amount and use your house as part of the security. All you need to know is that the property you use becomes at risk on default payments.
Leasing/ Contract Arrangements
This is a long-term agreement where you rent a car and pay its monthly fee as you use it. But first, you will require a hefty deposit. The car providers are usually strict on car usage condition or mileage. So, it’s best to maintain the car and avoid climbing Kilimanjaro with it. When done with the agreement, you can hand back your car and pick another.
When you return your car on the date with the necessary payments, you will not pay anything more as long as the vehicle is in excellent condition.
To get a car loan, you must be responsible. You will be required to clean your credit score. It means that you will need to maximize out your credit cards, free from fraud and paying the bills on time. If you don’t have a high score, polish it over a few more months before looking for a car finance deal.