So you’ve decided to get that car that you have been looking at for weeks. With no cash to pay for it in full, you have no other option but to apply for a car loan. Who wants more debt when you have a house that you are also paying on installment? However, you figured out that you income can still accommodate one more loan. Before you sign a contract with the dealer, know the pros and cons of having a car loan.
Car Loan Advantages:
- With a car loan, you can immediately get what you need today instead of waiting to save money and purchase it in a few years. Your savings might be used for other things and you might not get to buying the car that you want.
- With the competition between dealers to get new customers, more attractive interest rates and terms are being offered. Buyers can take advantage of this to their advantage.
- A car loan will give you the latest model of the car that you want. If you save up for a car, you might not get this option.
- A car, just like a house is a security that the lender can hold on to in case you don’t make payment so even with a bad credit report, you can get a loan. You just have to pay higher interest rates.
Car Loan Disadvantages:
- If you are paying off other loans like installments on a house you purchase, it might be difficult to make the monthly payments. You have to make accurate projections on your income to avoid not making payment.
- If you have bad credit, you might not have a choice on the make and model of the car that you will be getting. This defeats the purpose of getting a car loan instead of saving money to buy on cash purchase.
Always keep in mind that the lenders are in business to make money and might be offering you rates that are not competitive. Keep on negotiating for the best rates and terms in your favor. Know what you can afford so you won’t get something that would strain your budget. Otherwise, a car loan is a good solution to a need that you have to provide your family with the vehicle that they require.