By Eric Reyes
When it comes to buying a new car, would-be buyers often fail to consider beforehand how they will pay. Although some may be fortunate enough to be able to afford the cash at the time of purchase, many others will require some type of financing in order to drive the car away from the lot or seller. This brief guide will discuss seven different ways to finance a car.
Apply Before Shopping
Before you start looking for the money, you should keep in mind that there will be other costs to consider like full coverage auto insurance and registration fees. You might want to check these costs before signing up for anything just to make sure you can afford them.
In the modern world, technology has made obtaining credit easier and faster than ever before. This enables buyers to apply for financing before they even go shopping for a car, knowing they will be able to complete a desired purchase. Many lenders will provide buyers with an approval that can last from a day to a couple weeks.
Apply on the Spot
Many car buyers elect to apply for financing on the spot, or at the auto dealership. A car loan may provide another source of revenue for dealerships, however, and interest rates could potentially be higher. Dealers may, however, provide several financing options and can often get financing for credit-challenged buyers.
Use Home Equity
A home equity line of credit could also make sense for some buyers. This type of loan is based on equity in your house, and often carries some of the lowest consumer lending charges available in the market. A home equity loan would allow you to simply write a check at the dealership for the total purchase amount. That amount would then be paid back to the home lender over time.
A personal loan is typically an installment loan that is made to a borrower by a third-party lender. These loans may charge higher interest and fees, however, they may also be easier to obtain for those with credit issues. An installment loan provider simply provides the borrower with the total amount of funds borrowed, and the borrower can then use those funds as they see fit. In this case, the buyer would likely write a check for the car being purchased and then pay off the personal loan over time.
Loans From Friends or Family
Car purchasers may also borrow funds from friends or family. These loans can get tricky, however, as a lack of repayment according to agreed upon terms may fuel a disagreement that can cause problems between the two parties. If you decide to borrow funds from a friend or family member, make sure to discuss what you are willing to pay in interest and how the loan will be repaid before taking it out.
A payday loan is a short-term loan that is most often made until the borrower’s next payday at which time the loan is repaid in full. if a car buyer is looking to purchase a car that is not overly costly, he or she may be able to borrow money using a payday loan to make the purchase right away. These loans can have significantly higher interest rates and fees, however, and can become difficult to repay if not repaid on time.
Finance Through Uber or Companies
Modern rideshare companies, such as Uber, may have programs in place to assist drivers in purchasing cars. These programs may provide auto financing for the buyer, however, the buyer then may have to drive for the company until the loan is repaid in full. For the credit challenged or those with little to no money, however, such options may provide the only realistic solution. These companies may provide more affordable rates and terms for borrowers, making the purchase easier and more affordable.
Of course, most types of financing will require some type of credit. The higher the credit score is, the easier and less expensive it is to borrow money. Taking care of credit is always important. if you have had some slip ups, however, don’t despair. Even with imperfect or even poor credit, financing options do exist that may allow you to buy a new car. Make sure to do your homework first. This includes checking your credit score and researching beforehand what you may be expected to pay for financing.
Related information: how long do you have to get insurance after buying a used car.
About the Author
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.