Saving up money for a car purchase is not an easy task, especially in this financial climate when it is really hard to save money up front for anything. That doesn?t mean that you don?t have any options when you want to buy yourself a car. It just means that these financial options you turn to come with strings attached and that it?s best for you to do some research in car financing, before you dive headfirst into the whole bloody mess that is balancing to meet your financial obligations from month to month.
Some of the most common ways available for financing a car that are available worldwide are: car loans, car leasing, chattel mortgage, personal loans and credit card loans. Each of these methods has it?s pro?s and con?s and here?s a brief overview of each, as well as a short explanation of how they are different from one another. Hopefully this will be of help to you when you make plans for a car purchase.
If you?ve ever picked up any sort of regular loans, you should be pretty familiar with how car loans work. You go to a bank, they examine your credit history and, together, you make a deal about how much money you can spend up front and for how long will you be paying that money back. The time frame for loans can be anything from 24 months to 86 months, and, during that time, you will be paying the money back in monthly installments with an agreed upon interest rate. If you miss too many payments, you will have to either renegotiate the deal with the bank or you will have your car seized and sold off so the bank can cover its losses.
Car leasing is not?a very common pick because people paying money usually like actually owning the product once the payment period is over. This is not the case with car leasing, as here you pay monthly installments for a certain amount of time and when the time period is over, bank (or lender you have made a deal with) takes away the car. Good side of this kind of car financing is that it?s much more affordable on short terms, if you need a car for a few weeks or months. The bad news is ? you don?t end up with a car.
This form of car financing resembles a typical car loan the most. It?s still a deal with you and the lender for a specific sum of money and you still get the sum up front, while you pay it back over time, but here you are the owner of the car right away, but the car has a mortgage set on it right away, used as a collateral against your loan. This is a secured type of loan with low interest rates, but the term of payment is much shorter than your regular loan (usually two to five years) so the monthly payment rates are a bit higher.
On the risky scale, this type of loan is inching its way into the red zone. This is NOT a secure loan which is why banks usually slap very high interest rates on you, and this type of loan can be pretty devastating to your credit card score, if you?re trying to maintain a high value of it. It can be made into a secure loan, if you pick up a mortgage against some valuable asset like your home, but that is risky, since missing on your payments can result in the bank evicting you from your home, selling it and paying you back the rest after it took the money you owed away. Of course, the banks don?t really go out of their way to reach the highest price possible, worrying only about being paid back for what you owe, anything over that would be irrelevant to them.
We?ve become a credit card society, so it?s no wonder that you can even buy a car with a credit card loan. Very high interest rates and a sum of money you need at once don?t make this an optimal form of car financing, but it?s still a way for you to buy a car, if your credit card limit is high enough, and you don?t really care about high interest rates on your credit card loan.
To conclude, as you can see, you have a lot of options. Be sure to thoroughly examine your options and go for the one that is most suitable to your wallet?s state. We all like our wallets to be chubby and we should do all that we can to keep them that way.
Author Bio:
Ivan Dimitrijevic writes about business and personal financing tips. Among other things he had articles published that consider a wide range of topics that include several car financing options and online business. Asides from writing as guest blogger, he also runs several personal blogs covering various topics he has done a lot of research on.
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