Financing a car purchase can be a headache and a disheartening experience. Your ordeal isn’t even over after you’ve chosen which car you’d like to buy, as the next step towards getting your vehicle is probably the hardest part: determining where and how you’re going to get a car loan to pay for it.
There are many ways of going about getting a loan to finance your purchase and there are various sources for you to get a loan from. Careful consideration is required before you feel tempted to go with the dealership for convenience’s sake. It’s always best to shop around for loans until you find something that fits you.
Getting a loan from the dealership
If you’re buying a car from a dealership, they will most likely try to get you to finance the car through the dealership itself. While it is fast and very convenient, there are a number of disadvantages involved. The sales agents will usually apply a lot of pressure in attempting to convince you to use the dealership loan, firstly.
The key disadvantage involved with going with the dealership’s loan is that you’ll have to prepare yourself for the onslaught of add-ons during the final sales push. The loans are usually front-loaded too, which means that the payments have more interest at the beginning of the loan. This means that you’ll end up paying more if you want to pay the loan off early.
Going to the bank
While getting a loan from the bank may not be as convenient as financing through a dealership, getting a car loan from the bank will get you competitive rates, personal service and no sales pitch for last-minute extensions. Your bank will also advise you if they think you’re paying too much for a car.
They’ll also sometimes throw in free life insurance along with the loan, which will usually be simple interest (meaning that the interest is split evenly across the term). The downside is that banks are unable to provide a loan as swiftly as a dealership will be able to.
These days, a lot of people often go with various online financial institutions in their search for the perfect car loan. They’re quick and easy and often offer competitive rates. Unfortunately, they don’t provide a personal service like the banks do and a degree of wariness is required, as there are scams to watch out for.
Some people try and get their car through a home equity loan. You’ll be able to deduct at least some of the interest from your taxes and you’ll get competitive rates. However, this may be risky, as you’ll be tying your car to your home, with the risk of losing both at the same time.
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