From time to time any driver will need to replace their car. Most will go for a second hand car, but even then, there will be a lump sum of money to pay out and it may not be easy to think of a way to be able to afford to pay for this. There will be some people that will have enough money saved up and it is always wise to start saving for a car as soon as you get a new one and by the time you need to replace it you might have enough saved up for the next. However, this may look very wise in theory, but in practise we often need to buy other things in between cars and it can mean that there is very little money left for saving anything. Therefore, most people will have to think of an alternative solution to fund the purchase of their vehicle.
- Car loan from dealer – getting a loan from a car dealer tends to be a pretty easy option. The dealer will usually have paperwork ready to be made out and they may even offer you a reduction in the price of the car if you use their finance. However, dealership finance can be expensive compared with banks. It is good to be prepared before you buy the car to find out more about it. You need to find out how much their finance deal will cost you and you will then be able to compare it with other options in order to work out which will be the best for you. Do be wary as well of interest free credit. This can be fantastic as you will not have to pay any interest at all and just repay the cost of the car over a period of time. There are a couple of things to be careful of, firstly that the price of the vehicles may be extra high because they have to add in the cost of administering the loans into the vehicles and so you may be better off using a different dealer and paying less for the car and using a bank loan. Also, just because the loan is interest free does not mean it will not have any charges at all. There could be administration fees or set up fees and you will also have to pay if you miss a repayment. Although this will be the case with all loans, they may have extra high charges on an interest free loan to make up for the loss they make from not charging interest. Therefore, investigate the loan really carefully.
- Personal loan from bank – a bank loan is the traditional way that people used to borrow. It is a way that many people feel is a secure way of borrowing as they trust their bank. Sometimes a personal loan can be a more expensive way to borrow though, depending on the rate and the amount that they charge. However, they may be more competitive than a dealer, so it is well worth finding out. You might also feel better borrowing from a bank than a dealer as you may have heard of them and feel you can trust them better than the finance company that the dealer decide to use.
- Overdraft – rather than getting a personal loan, some people might decide to use an overdraft to pay for their car instead. With an overdraft you tend not to be bale to borrow so much money, but it will obviously depend on the cost of your car and how high your overdraft limit is, as to whether an overdraft will be the right option for you.
- Borrow from friends or family – some people might consider borrowing from friends and family if they have the money that they can lend them. This can usually be a cheaper way to borrow as it is unlikely that they will charge interest or any other costs. Although this can be a big advantage it can sometimes cause problems between people. This happens if the lender needs the money back and the borrower cannot provide it or it could cause jealousy or other problems between people.
- Short term loan – A short-term loan is an option for those that need a really quick solution as you can tend to get the money very quickly. The credit check tends to be less stringent as well and so if you have a poor credit record then it can be a good solution for you. There are lots of short term lenders too, so you will have a lot of choice and this should mean that you will be able to find one that will lend you the amount of money that you need for a competitive price and with a repayment schedule that suits you.