Car loans are frequently becoming more and more available to us, mainly due to the economic climate. Maybe you are buying your first car, or you have never used any car financing before. Either way there will be a whole host of questions you need answers to before you sign on the dotted line. Finances can be confusing at the best of times, with a variety of interest rates, loan periods and a whole host of companies all vying for your attention; it is not the easiest mine field to navigate. Before you start shopping for your brand new vehicle, here are some of the most commonly asked questions that should help you battle your way through to the right loan for you.
Can I get a car loan even though I have bad credit?
If you know that your credit history is far from perfect, then you might be worried about whether or not you can even get a car loan. The first and most important thing to do is to get a copy of your credit report. This will tell you exactly where you are up to with your personal credit score. Once you have this information then you are able to start shopping around.
There are plenty of financial institutions that offer car loans for bad credit, but you will need to be extra picky as to which one you choose as mistakes could lead to your credit being damaged even further. Don’t just rely in the dealer to grant you your financing as you may find that this comes with a higher rate of interest than other lenders, at the end of the day they make extra money through financing payments. Car loans for people with bad credit do come with a higher interest rate than other loans, so before you decide to sign for the loan, make sure you know the amount you can afford to pay back each month; the most important thing is to not get into any further debt or to damage your credit at all, in fact paying the amount you can afford will help you to rebuild your credit.
How do I know whether a second hand car or a brand new one is best for me?
Car loans are obviously determined by the total amount you need to borrow to pay for the vehicle. So, if you can’t afford to pay back a large loan, then a second hand car may be the perfect option for you. In essence the decision to buy pre-owned or new comes down how much finance is available to you and what form of car you want/need. Here are the ins and outs of both to help you to make the right decision for you.
New cars will come to you with a manufacturer’s warranty, usually giving you up to 3 years coverage. This is the beauty of buying a brand new vehicle. Even though it is less likely to breakdown or need repairs than a pre-owned car, it is still covered by the manufacturer. When you get your new car, there is likely to be no nasty surprises with it; it should be in perfect condition with all the latest safety and technology features as described.
Brand new cars are considerably more expensive to finance than their used counterparts and can lose up to 40% of their value as soon as you get the keys – yes that is an awful lot of money to lose straight away. Due to this and the higher fees you will have to pay each month, your comprehensive insurance will also be greater.
Pre-owned cars, on the other hand will require smaller loans as they are in general far cheaper to buy. Remember though, that they are cheaper for a reason; they will have a certain mileage to them that can flag up certain issues with the vehicle, that you wouldn’t get from a new car. This could be anything from repairs that need to be made through to a lower level of safety features.
The benefits of a used car are the lower repayments, lower insurance costs and the vehicle will retain its value for longer. This is a perfect form of vehicle for brand new drivers, or someone that simply needs to get to or from work every day. It is worth noting through, that although you are paying less each month in loan repayments, you may need to cover costs for repairs etc.
The main thing to remember is that choosing your car loan will be very personal to your circumstances, so do your research. You will need to know how much credit you can get, how much interest you will be required to pay and what sort of car will suit you. Once you have all these answers, picking the car will be easy.