Most people do not have enough cash to buy a new car or repair their current vehicle and they also don’t want to use their money from the savings account. This in turn means that they will have to purchase the car by financing it. There are three sources of car financing: (i) a bank, (ii) credit union, (iii) an online financial institute, or (iv) dealership.
But before anyone goes ahead to finance their car they must know the pros and cons of each of the options mentioned above.
Car financing through dealership is quick, convenient and sometimes also competitive. On the other hand, you should be prepared for big sales push on add-ons, high pressure, and loans are usually front loaded.
They offer competitive rates, no sales pitch for add-ons and will tell you if you are paying a lot for the car. They also provide personal service and free life insurance or disability insurance with loans. Lastly, loans come with simple interest. Despite having several advantages, when compared to dealership financing bank and credit union financing are not very convenient and cannot be set up at night or during the weekend.
Online Financial Institute
Financing from online financial institute is usually easy to set up as well as convenient. Along with that, they also offer competitive rates. When looking at its disadvantages, it can be seen that you will have to deal with someone unknown, it is not the one that will offer a personal service and you will have to watch out for scams.
Home Equity Loan
This is another way you can finance your car or repair works. The good part about home equity loan is that you can deduce some amount of interest from your taxes and they also offer competitive rates. While on the other hand, it can be a risky business since taking home equity loan means that you are linking your car to your home.
Suitable interest rate
Coming to the interest rate, your interest rate depends on your credit history and credit score. Lenders will find a lot about your spending and saving habits through having a look at your credit history. Your interest rate might be increased if your loan is considered a high-risk. Another factor that influences the interest rate is the length of the loan. Shorter loans have lower interest rates as well as higher payment rates. Moreover, new cars have lower interest rates. Furthermore, the place you are located at also plays a vital role in deciding your interest rate because your location can say a lot about your expanses.
Before you go ahead for any source of car financing it is best to thoroughly look at their pros and cons. In addition to that, you must also visit the organization’s website to have a look at their terms and conditions. Keep your income in mind when getting car finance because you don’t want to get into huge debts.