Working out the Cost of a Car Finance Loan
Depending on your current needs and desires there are several different types of personal finance that you can apply for. From the change in reputation of payday loan providers in the form of now reputable short-term loan lenders, to mortgage lenders and credit cards, there is a finance product and service that is suitable to your upcoming needs. From short-term financial fixes to long-term solutions, with the correct research and time you can find a suitable financial product for your needs. When it comes to car financing there are a few ways in which you can approach it. Here, we take a look at the cost of a car finance loan and how you should go about making the right decision for you.
Once you have made a choice to go ahead with purchasing a car using a car finance product you generally have three choices to make:
An Unsecured Personal Loan – By taking out an unsecured personal loan you can borrow the exact amount of money that you require to purchase a car. It works in the same way as any other personal loan you take out, in that you have set payments that are made each month including all fees and interest, until the total is paid off. This approach to car finance allows you to own the car right away and have the option to sell in future if needed, prior to the end of the personal loan repayment period.
Hire Purchase – With a hire purchase you are still working in a similar way to a personal loan, where you make a payment each month. The difference is, that instead of paying off a loan you have taken out, you are making monthly payments to a car finance company. They own the car and lease it to you, and once the term is over you own the car.
Personal Contract Purchase – This is similar to a hire purchase situation but the difference is that you pay off the cars depreciation value. At the end of the contract you have a choice whether to return the car, to get another personal contract purchase on a new car, or to pay off the rest of the car.
In terms of overall cost, there are a few different ways to look at it. It will depend on a few factors. The type of loan you take out, as car finance will have the biggest impact, with personal contract purchases having a lower level of monthly repayments, as you are not paying for the car itself.
Another factor as to how expensive car finance turns out to be is how much of a deposit you can afford to put down in the first place. Depending on the lender, the higher the deposit put down the lower the monthly repayments. The interest on a loan is another factor, and must be taken into consideration prior to agreeing to car finance, as are the fees and any potential charges linked to the loan. Always be aware of all of these factors, as well as your credit score when applying for a car finance loan.