Buying a new car requires a lot of financial planning, and unless you are not having tons of cash with you, you will need some financing for it. With different financing options available today, it becomes a question of what type of loan you want for your new vehicle.
You can either go for a personal loan or an auto loan. But what we need to see is; which is better for you? To evaluate the same, let's find out more about them.
What is the Purpose of Getting Financing?
Every loan has a specific purpose. For example, you must use an auto loan for a car. Sometimes, the lender may provide you with a higher LTV to help you make other car-related expenses such as taxes and registration. However, your choice will be limited to the automobile.
On the other hand, a personal loan has multiple uses. It gives more flexibility to its borrowers. So, if you need money for reasons apart from buying a car, you can apply for a personal loan. You can use it for buying a car, upgrading your phone, booking tickets for a vacation, etc.
What is the Financial Cost of applying for a Loan?
The rate of interest on personal loans is very high when compared to car loans. It is because personal loans are usually unsecured, and they do not involve any collateral. It means if you miss out on payments, the lender will have no way to recover their losses. Hence, personal loans are riskier to the lender, and so it justifies the extra cost.
As you do not have to spend any money on a down payment while financing your vehicle with a personal loan, it may seem like an enticing proposition. But, applying for a substantial loan amount with a higher interest rate may make monthly payments difficult. So, it is always essential to understand your financial situation before making a decision.
Have you considered your Credit Score?
When it comes to auto loans, many lenders provide bad credit auto loans. There are several Buy Here Pay Here dealerships that help you secure a loan at their dealership lot. You will be able to find bad credit auto financing online as well. You may have to make a down payment, but the approval rate on bad credit car loans is pretty high.
Do you want a Shorter Loan Term?
Generally, the loan term for personal financing ranges between one to five years. It means if you can make larger monthly payments regularly, you can choose personal loans and avoid visiting an auto lender.
The term for an auto loan ranges from three to eight years, thus allowing you to enjoy affordable monthly payments. It ensures that the auto loan does not become a burden for you, and you get to enjoy the perks of having a car for a very long time. While choosing an auto lender, discuss the pre-payment clause. Choose someone who does not charge a pre-payment penalty. It means you will be able to pay off the loan early according to your convenience.
Make Smarter Financial Decisions!
Although you have to consider many factors before deciding, it is always advisable to take things slowly. Consider your financial situation and research the financing market. If you can find a lender with an affordable car finance solution, it is best to go for an auto loan. Remember, an auto loan is a more secure option, and the loan approval criteria are simple.
EZAutoFinance.net is the best subprime auto lender in America. Apply now to get bad credit auto financing at the click of the mouse button.
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