If you’re thinking of borrowing money to buy a new or used car, you’ve probably been wondering what some of the pros and cons of Car Loans are. It’s important to weigh up information like this before making any firm decisions. Getting into debt to purchase a car is quite a big responsibility, so it’s not something you want to venture into blind.
This article will cover some of the pros and cons of Car Loans, so you have a clearer understanding of exactly what you will be signing up for if you decide to go ahead and borrow the cash to buy a car.
A Car Loan Can Help You Build a Healthy Credit Record
When you borrow money to buy a car and start paying off the debt, if you make all of your repayments on time, you’ll start to build up a solid credit rating. A good credit score is important if you ever want to borrow money in the future. It can also help you secure other forms of credit. For example, if you’re in business for yourself, you might be able to negotiate accounts with your suppliers. Before suppliers agree to extend your credit, they’ll often check your credit history and credit score first.
Are Secured Car Loans a Good Idea?
With a secured Car Loan, effectively, the car you buy acts as collateral for the lender. Your bank or other lending institution basically owns your new car until it’s been fully paid for. Secured Car Loans have the advantage of making it easier to get approval, as the lender has the security of the car itself should the borrower renege on the loan. While getting approval may be easier, there is always the risk of losing your car and having nothing to show for the money you’ve already paid towards it.
Unsecured Car Loans in the form of a Personal Loan is often a better idea, as the lender cannot take your car away from you. Of course, you’re still obligated to repay the borrowed amount in full, but at least your car won’t be at risk.
You’ll Be Paying Fees and Interest
All loans and forms of credit come with fees and interest attached. It’s how the lender makes a profit on the deal. However, while this is expected, what you’ll want to take notice of is just how many fees there are and how high the interest rate will be. Keep in mind that some loans offer variable interest rates, which means the amount you pay weekly or monthly can fluctuate.
If you can buy a car outright with your own cash, you won’t be paying any extra on the deal.
You Don’t Need Your Own Money
Cars are expensive items if you want a new one or good quality used car. The amount is usually out of reach of the average Aussie. Therefore, to get behind the wheel of a car sooner, finance is required.
This is good news, as you don’t need any of your own money to buy a car. If you do have some money to put towards the purchase, it’s better, but even if you don’t, you can borrow the money for the entire amount with a unsecured Car Loan or Personal Loan.
Choosing the Right Lender For a Loan
Take some time to shop around for the right lender. When it comes to Car Loans, Australia has many lenders that can loan you the money. Not all of them will be the right fit for you and your personal circumstances though.
Take your time during this phase of the process, as getting the right deal can save you both money and headaches. Ask people you know for recommendations or research Car Loans online. Loan comparison sites can help with this, but always study a particular lender’s website for more accurate and detailed information on their loans and their loan terms.
Buying a new car is exciting, but don’t get carried away by the idea of driving a new car. Weigh up the pros and cons before entering into a deal to finance your new car purchase.