Loan for Car – Different Options Available
Owning a car is definitely one of the most expensive purchase decisions to make. Not only the purchasing, but the servicing and fuel pricing can also take a toll on your earning. But at the same time, there are several benefits associated with owning a car. It reflects your status and class in the society. You also enjoy the comfort of private transport facility anytime. If you leave aside the expenses, there are many advantages associated with owning a private vehicle. Therefore, it really is worth a try to take a loan for your new purchase.
Applying for the loan
With so many financial institutes available, it now becomes easier than before to apply for a car loan. Unless you are a billionaire, applying for a vehicle loan is the best policy to opt for. Be it for new or used vehicles, there are several effective loan schemes available for anyone interested in owning a vehicle.
Looking at the best options available
The unfortunate part is that most of us don’t spare ample time to look for the best loan options available. As a result, they have to face some kind of unexpected results and unforeseen circumstances. To avoid any such trouble, always talk to the creditors & loan department and understand the options as well as the guidelines available. Learn about the interest rates, the tenure of payment and other associated details before choosing an option. It is crucial and equally important to consider your credit score and financial status prior to applying for a loan for car.
Determining your budget
First and foremost, you need to determine the budget you can afford. Look for different models from different manufacturers. Unless you have a preference for some particular model from some specific brand, you must consider the mileage, space and sitting capacity, servicing prospects and costs, etc. All these help in determining the budget and affordability for the vehicle you tend to purchase.
Short-term and long-term loans
Each of these loans comes with some drawbacks as well as advantages. For new cars, long-term loans are the best option to avail. In fact, lenders will mostly restrict long-term loan options for new cars. These loans come with minimal monthly payments, since they are spread over a certain time limit (3-7 years). However, the longer the loan repayment period, higher will be the interest rates incurred.
For example, a vehicle purchased for $15,000 with loan scheme for 4 years will ultimately cost somewhere around $18,000. Also, you need to consider the devaluation of the vehicle over the loan period. Some of the loan guidelines provide options on lesser loan repayment in case the vehicle gets destroyed or damaged before the total loan amount is repaid.
Short-term loan options are best suited for used vehicles. These loan terms can last for a maximum of 3 years. Since the repayment period is lesser, you can save some additional amount of money in terms of the interest rates. On an overall basis, the monthly payments will be higher, but at the same time, you have to pay a lesser amount on an overall basis.
You can also opt for leasing schemes. Leasing a car is a great way to upgrade the vehicle every three to four years or so. This also helps in avoiding devaluation of a vehicle. Also, the lease payment terms are easier when compared to loan payments. However, be aware of the hidden costs associated.
When leasing a vehicle, you need to provide down payment. This is often termed as Capitalized Cost Reduction. This also helps in reducing the overall lease amount. There will also be a sort of security deposit, which gets refunded under certain terms and conditions once the lease ends. This is termed as Reconditioning Reserve.