They say: A journey of a thousand miles starts with a single step. I say: Why are you walking such crazy distances? That’s why cars were invented. There are many ways to buy one so if you’re in the market for a new set of wheels, behold, a guide to help you suss out the wisest option.
If you’ve got savings in the bank, it’s better in the long term to pay off as much of the car as possible. This reduces the amount you have to pay in interest for any finance you take out.
Always remember to hold back some of your savings. It’ll cover you for any future emergencies and you won’t be left short of cash.
You can get a personal loan through a bank or finance company and borrow anything from £1000 and up, over 6 months or more.
There are many different types of personal loan, which you can take out as a car loan, and they mainly vary in APR. With so many, the smartest thing to do is shop around. MoneyGuru offers a comparison table and an online application to help you find the cheapest loans available.
Your credit rating is often a big factor in how much interest you’ll pay on a car loan. A poor rating could mean you’ll pay a higher APR, or you might even be refused a loan. But there are ways to improve your credit rating.
A personal loan is often the quickest and most straightforward way to get a car loan. Applications can be made online, in person or over the phone.
Buying a car on a hire purchase agreement is a common way of getting a car through a dealership. They’ll arrange all the financing for you so it’s usually pretty straightforward.
This kind of car loan is paid back in monthly instalments over 12 to 60 months. You’ll normally have to pay a 10% deposit.
Hire purchase is secured against the vehicle, which means you won’t own the car until the last payment has been made. But the benefit is, it’s not secured against your home.
This involves borrowing a car from a dealer, for a set period of time, and paying a monthly amount. This is often how company cars are financed.
The monthly payments usually cover servicing, but you’re only allowed to drive the car a certain number of miles. When the car exceeds this number, there will normally be additional charges.
The car never belongs to you and when the contract ends, it has to be returned to the dealer.
Always set a budget for your monthly payments and make sure you can still live comfortably.
If you already have a car, you may be able to part-exchange it for the car you want to buy. This reduces the price and mean your car loan would be cheaper.
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