If you’re buying a car, and especially if you’re buying a car for the very first time, you can be absolutely stumped as to how to pay for it. There are so many options available it can seem quite puzzling. Unless you have cash in the bank so you can buy a good quality car, it is almost impossible to do anything other then explore alternative car finance options.
One option that you can take on board is that of a personal loan. Around 33% of all car buyers take out a personal loan in order to purchase the vehicle. It’s a popular way to get things done in this regard, and because they are so easy to arrange, you can see why.
The general theory of a personal loan is that you borrow money from the bank, building society or other reputable lender. This then allows you to own the car out right. The money is yours; you have borrowed it and will have to pay it back through the stages of the loan.
But this doesn’t mean that it is a simple process. Once you have decided to take out a personal loan, you need to find the best place to get one from. This means looking at all the lenders that are out there and comparing one particular key aspect to see which one offers the best deal for you as a borrower.
The APR is the thing
We are talking about the annual percentage rate or APR. This is the easiest way for you to compare loans and the quality of the loans. It gives you a good strong indication immediately as to how much money you have to pay back, and how much the whole thing will cost over the lifetime of the loan. Most lenders show the APR quickly and clearly. You need to know what the APR is before you investigate a loan, so ask a lender to tell you outright if the APR is not clear.
Bear in mind that most car finance lenders have something called a headline rate. This may not be the rate that you will receive in the end, because it does depend on your credit worthiness.
It can be tempting to go for a longer loan period because of the smaller monthly payments this will entail. But bear in mind that if you do this you will end up paying more interest over time. So it’s worth checking the details on this one, and picking out the best rate for you. The downside of any unsecured personal loan such as this one is that your assets and other aspects of your belongings could be seized if you do default on payments.
One key aspect that some people aren’t aware of is that if you go to a dealership to raise car finance through them, the only thing that is at risk if you happen to default is the car itself.
No deposit? A personal loan may help
You might want to consider a personal loan if you don’t have a deposit for a car finance deal from a dealership. A personal loan takes away that issue and of course gives you the car outright. If you plan to keep the car for a long time, without changing it, the personal loan may well be a good idea for you.
One of the key considerations is the annual mileage restriction a car dealership may place on it’s finance deals. If you don’t want to worry about that, take out a personal loan and then use that cash to buy the vehicle with. There won’t be any car mileage restrictions applied.
Arranging a personal loan to buy a car has it’s benefits, and is just one of the ways in which you can raise car finance for this most important of purchases.