If you’re just about tired of sweating it out in your old “skedonk” of a car, perhaps you’re contemplating the thought of trading it in for some shiny new, though affordable, set of wheels.
You probably know that buying a car is no simple decision. From buying cash, to buying a car on finance, there are many options. You also have to remember to factor in running costs. In fact, it is probably the second most expensive resource you’ll buy after a home. Thus, it’s important to ensure that you’re getting the best deal possible.
If you’re reading this, chances are that you’re not the offspring of the Rockefellers, and you most likely need a personal loan or vehicle finance to get that car you want.
If you’ve been wondering about the difference between getting a personal loan or vehicle financing, you’re at the right place. Personal loans and car loans represent two of the most common financing options.
Let’s glance at the differences:
Using a Personal loan.
You can use a personal loan for almost any purpose. Whether you need to cover medical costs, unforeseen bills, improve your home, or in this case, purchase a car. Personal loans are usually the cheapest way of financing a car deal, provided you have a good credit rating. Always look at your APR (annual percentage rate) to know what exactly you’ll pay as it factors in all fees and other costs associated with the loan. You can apply for a secured (provide collateral as security) or an unsecured personal loan. If you have great confidence in your ability to make repayment, you can consider a secured loan as this can get a lower interest rate. Though, if you’re not so comfortable with the thought of leveraging against the roof over your head, apply for an unsecured personal loan.
To sum up a personal loan:
- No restrictions on how funds are spent
- Flexibility in payment structure
- Interest rates are a bit higher
- Strict lending requirements
- Consumers with lower credit scores won’t qualify as easily
A car loan is a form of a personal loan, but as the name states, it’s designed strictly for the purchase of a car. It’s secured against the car you want to purchase, so if you default on your payments, it’s goodbye shiny new wheels. A car loan has a fixed interest rate and thus fixed monthly repayments over the course of your repayment schedule. Also, the debt of a car loan is deemed as lower risk, thus resulting in the lower interest rate.
To sum up a car loan:
- Usually a lower interest rate
- Easier to obtain
- Often a convenient ‘on the spot’ finance solution
- You don’t have title to the car until the final repayment is made
- A deposit is generally required to secure the loan
It’s a big step deciding on what type of loan you’re going to apply for to purchase a car, we hope this provides you with more clarity in your decision-making process. Feel free to make use of the Fincheck Personal loan comparison page.