Becoming a car owner for the first time comes with a lot of joy. The comfort and flexibility it offers are worth the sacrifice to own one. However, it can also be a challenging process. You may need to spend days or months researching for the best car.
Also, you need to secure finances for your dream car. Financing should be your main focus even before you think of the car you want to buy. Fortunately, there are ways you can finance your car. Below are tips to help you finance your car with ease.
Auto Loans
Auto loans are types of secured credits that allow you to get money to buy your first dream car. Some people opt for car loans because of their low cost and manageable option.
A car loan is a secured loan dedicated to buying a car. This is what makes it cheaper than unsecured loans because the car’s value secures the loan risk. Car loans are flexible. You can go for a higher lending limit as long as you qualify for it based on your credit history and income ratio.
Personal Loans
Another option to finance your car is going for a personal loan. This is an unsecured loan, and it means that your car’s value will not be tied to the loan repayment terms. You will need to ensure that you settle the loan as per the terms of the agreement.
The beauty of taking a personal loan to finance your car is that the car fully belongs to you. However, you will still owe the lender the loan amount you borrowed, including fees and interest rates.
Hire Purchase
You can opt for a hire purchase to own your first car. The first thing you will need to do is make a down payment for your car and commit to paying the remaining amount before the contract ends.
The deposit is about 10% of the car’s value, and you will have to pay the remaining money in installments going between 12 to 60 months. It’s worth noting that hire purchase rates are competitive for new cars and less for used vehicles. So, analyze your options before you go for this option.
Personal Contract Purchase
This is the most popular way to finance a car. It is suitable for people in a better financial position because you will need to deposit some money first. If you deposit a higher amount, you will have smaller monthly repayments, unlike when you pay a smaller deposit.
Also, you will need to clear your outstanding balance within the expected time, and this can be between three to five years. Once you clear your payment, you can trade-in your car and upgrade.
You also have an option to pay a larger amount at the end of the term. Since this is your first time buying a car, this option can be extremely expensive unless you have secure financial backing.
Consider Your Credit Worth
Most people often fail to own their first cars or take longer to buy one if they have a bad credit history. To avoid getting frustrated along the way, ensure you assess your creditworthiness.
Some first-time car buyers may have little to no credit rating, which means they will likely pay more than the normal rates. In this case, it’d be best to take time and build your credit score before you go shopping for your dream car.
Keep a Shorter Loan Term
Ensure your loan repayment term is as short as possible. This enables you to pay lower interest rates, although you will have to commit to a higher monthly payment.
A longer repayment term comes with a higher interest rate. This can drain you financially. Ensure you explore your options well and save money in the long run.
The Bottom Line
Financing your first car can be an easy and seamless process if you explore your options well. You want to ensure that you make informed decisions to avoid getting into trouble with lenders and car dealers.
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