Getting a new car is very exciting; however, in order to pay for the vehicle, you will need to finance it. You want to carefully consider your financing options so that you can get the best deal for you. There are 5 loan options for you to think about when financing a new car:
- A Bank Loan: The loans that you can get through the bank are either secured or unsecured. They are usually offered between 2 and 6 years and are mostly fixed rates. You might begin with your own bank or credit union, as they usually offer the lowest rates. If you have a good track record with your bank, they will probably be very easy to do business with. Then you can shop around on the internet to compare rates. You can get quotes online and get pre-approved, thus decreasing your anxiety.
- A Dealership Loan: One of the main advantages of getting a loan through the dealership is that you are already there, so it is quick. You can arrange your loan right after you choose the car that you want. If you have bad credit, dealerships can also help you find a program that can help. A dealer might also have the power to find special deals, such as a no-interest loan for a certain amount of time.
- Home Equity Loan: With a home equity loan, you can borrow against the equity in your home. The advantage of this loan is that the interest rate is usually always lower because your house serves as collateral. You can also deduct the interest from your taxes.
- Leasing the Car: You can decide to lease the car, whereas most contracts allow you to drive the car up to 12,000 miles a year. You will be asked to fill out a credit application and based on your credit score and length of the lease, the dealer will look for a lease for you. When you have made all of the lease payments, you can then choose to buy the car for the residual price or negotiate for even a lower price.
- Credit Card Financing: If you have a high limit on your credit card, you could finance your new car by using your credit card. However, there are several dealers that will not accept credit card payments directly from your credit card. Therefore, you would need to take out a cash advance on the card. Your decision to finance your car on your credit card should probably be based on the interest rate. If you have a 0 percent balance transfer interest rate and can make payments promptly, this might be a good option.
Megan Perry is a writer who enjoys sharing her tips and thoughts on a number of subjects and fields. For more information about financing, Grad Money Matters offers readers tips for refinancing auto loans.
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