subject: Finding the Best Deal on a Low Cost Car Loan [print this page] Next to your house, your car is likely to be your single biggest financial outlay and it is unlikely that you will be able to pay for this in one go. For most people, a low cost car loan is the solution. This is a personal loan aimed specifically at buying a new car. It can be used towards the cost of a new or used car and is similar to a hire purchase agreement. Effectively this means that you are leasing your car until you have paid off the loan in full. On this great day, the sole ownership of the car is passed on to you.
The chief advantage of a low cost car loan is that you will be able to buy your car now, instead of waiting years to save up and pay for it outright. It is often considered the best way to finance your new car purchase and is quick and easy to arrange because your car acts as collateral for the loan. This does mean, of course, that if you default on payments, then your car can be taken away from you by the lender.
Before you rush out to your nearest car dealership, however, there are one or two things you need to consider before applying for your low cost car loan. Some careful budgeting needs to be done so that you know exactly how much you need to borrow and how long it will take you to pay the loan back. Opting for a lower down payment will increase the total cost of the loan and possibly also prolong the repayment term.
The disadvantage of a long term loan is that you could end up owing more on your vehicle than it is worth and being saddled with repayments for years to come, even with a low cost car loan. It is therefore a good idea to put together the maximum down payment you can afford and reduce the amount you borrow and the length of time you choose to repay, as much as possible.
Take time to read the small print when you take out your low cost car loan. Try to find a lender that will offer some flexibility in case you find yourself in a position to make additional payments or pay off the loan earlier. Some lenders will impose penalties for this, so it is worth asking very specific questions before signing on the dotted line.
Finding the best deal is important. The dealership from which you buy your car will try to persuade you take a loan with them and this may seem easier for you. However, if you are prepared to shop around, you are likely to find a much better deal on your low cost car loan elsewhere. You can check with your bank, a credit union or any one of the large number of online loan agencies and weigh up the pros and cons of their terms before you commit. At the very least, this will inform you about what is available and may provide you with some extra bargaining power with the dealership when negotiating your low cost car loan.
