Getting a car loan is not much fun. Cars can be very convenient, help us to do a lot of things we would otherwise not be able to do and help a lot of people to get to work. However, they cost a lot of money and a lot of people will need to get out a loan in order to pay for one. Therefore if you are looking for a car loan then where can you find the best rates?
It is very convenient to organise your car loan through the car dealer. They may even give you a bit of money off the cost of the ca if you take the finance through them. However, it is likely that you will not get the best possible deal this way. Make sure that you compare their deals, including any reduction in price you get for the car, with other places that offer loans. You are likely to find that you can get a better deal elsewhere. This is because the dealer will often offer cars at a low price but make their profits from the finance deal. You could end up paying charges as well as high interest and so it is worth adding up the cost of this sort of finance and comparing it with others.
Often a secure loan from a financial institution could be cheaper. Take a look at your options and see what is available. With these you will also need to calculate the total cost, so not just how much you will pay out in total for interest but add in any other costs as well. There may be administration charges for setting up the loan and possibly other fees as well.
It might be tempting to use a credit card or unsecured loan to pay for a new car. This is unwise though because they are very expensive. The interest rate on these sorts of loans are very high and so unless you really need the car and can find no other ways to finance the purchase, then these should be avoided.
It is worth considering whether you can pay for the car with your savings or whether you have enough time to save up to pay for it without borrowing any money. Most loans are expensive and this would be a way to avoid these costs. However, there are some interest free loans which could be worth considering. An interest free credit card, for example, could be a good choice. You will need to make sure that you pay back what is owed before the interest free period ends though, as once it goes to the standard variable rate you could start paying a very large amount of interest. However, if you pay back some each month, spreading the cost of what is owed over the zero interest period, then you should be able to take advantage of this deal. Sometimes car dealers offer 0% finance deals as well. These can seem attractive but it is worth being aware of a few things. The cost of the finance may partly be added into the cost of the car and so you may find a similar car cheaper elsewhere. If you miss a payment, you may find that the amount that you are charged is far higher than if you miss one with another lender. It is worth comparing the different charges to see. You may think this is not worth it because you do not think that you will miss a payment but it is worth being aware anyway, just in case.
Another thing to be aware of is any early redemption fee. These are charged if you want to pay the loan back early. You might think that you will want to do this in the future so that you can get rid of the debt early and save money on interest. However, some lenders will charge you. If you want to do this. You may just be charged a month’s interest, which could be reasonable if you still have a year to pay so are saving 12 months interest by doing so. However, you could be charged significantly more and it may not even be worth paying it off early. So if you think you will be likely to want to pay it off early, make sure that you check for this.