There are so many finance options available to the modern consumer it can be confusing trying to work out which deal could best suit you. It is important if you are thinking about buying a car on finance to make sure you pick the right deal for your own individual circumstances. Any finance deal can be a strain on your budget if you borrow more than you can afford to repay so you do need to be realistic and approach taking out car finance in practical way.
Types of Car Finance
If you are thinking about taking out finance to buy your next car you will have a number of options available to you. There are many different types of car finance and the main options are:
– Dealer Finance – dealers are able to offer a number of competitive finance options that can help you to afford your next car. The most popular option is Hire Purchase Agreements (HP). These agreements are very straightforward and you will basically borrow enough money to cover the sale price of the car and you will then repay these costs monthly. HP is very much like a personal loan from a bank or building society but the main difference is that the money is borrowed against the car itself and you will need to pay a deposit in most cases before you can drive the car away.
– Personal Loans – personal loans are available from lenders such as banks and building societies. These are offered at different rates of lending so it is very important that you spend some time shopping around so that you can find the best deal for you. Personal loans can have some very strict borrowing guidelines so it is essential that you read through the loan agreement very carefully so that you understand your responsibilities as the borrower.
– Extending Your Mortgage – if you have a mortgage then there are a number of additional finance options available to you. If you have overpaid your mortgage over the years then you may in some cases be able to borrow this money back again for big purchases such as a new car. Make sure you check with your lender first that there are no penalties for doing this. You could also extend your mortgage by a specified amount and this could help you to spread the costs of your car payment out over a longer term. Don’t forget if you borrow extra money on your mortgage it will extend the length of the loan term and could increase the monthly repayments.
Once you have decided on which method of finance is best for you it is a good idea to shop around and get a few different quotes. This will help you to see what deals are available and which lender can offer you the most cost effective finance package for your new car.