The following is a guest post. If interested in submitting a guest post please read my guest post policy and then contact me.Not many people have the money to buy a new car outright these days.
If you’re looking for a new motor and you don’t have a few thousand pounds lying around, there are a few options available.
Car finance and personal loans are just two options open to you. If accepted, you could soon be enjoying a brand new car. The question is which type of credit is better?
Understanding car finance
Car finance tends to be the most popular option. There are a few different types of finance available, with advantages and disadvantages to each one. The Financial Times has recently reported how car sales have rocketed in the UK thanks to finance deals. It’s estimated that around 83% of people looking to buy, or who have bought a car recently, have done so on finance.
Finance interest rates are currently quite low. That’s one of the reasons why they’ve become so popular. However, what you need to consider is the fact the car won’t be yours until you’ve repaid the full amount. If you miss a repayment, there’s a chance you could lose the car. Some finance deals even require you to give the car back at the end of the lease term. So if you are thinking of going down this route, you need to look into all of the financing options available with your eyes wide open.
Personal loans used to be the most popular option. This is perhaps because at one point it was the only real option available. While they may not be as popular today, there are still some advantages to using a personal loan over car finance. As reported by Moneywise.co.uk, personal loans are often cheaper than car dealership finance. This is especially true if you have a good credit rating.
Another advantage of using a personal loan to buy a new car is the fact the car will belong to you straight away. That means there’s no risk that it could be taken off you. However, if you miss a repayment it could obviously still lead to financial problems, with the possibility of a court appearance if your arrears are not settled satisfactorily. You’ll also likely need to pay a redemption fee if you plan on paying the loan off early. Personal loans tend to be taken out for a longer period than a finance deal. So you’ll be in debt a little longer than you would be if you opt for finance.
Overall there are advantages and disadvantages to both car finance and personal loans. You need to take all factors into account before choosing which one is right for you. Car finance is often easier to get and for many it seems more convenient. Just keep in mind that you could end up paying back a lot more than you would with a personal loan. Many dealerships also do a part exchange deal, where they’ll take your old car and either pay you for the difference in value or give you another car on finance.