Choosing your method for car creditNot many individuals are lucky enough to go out with a pocket full of money and hand over cash for their new or second hand car purchase. Due to this fact they have to give thought to the choosing the best method for car credit and there are several options that could be considered.
Not many individuals are lucky enough to go out with a pocket full of money and hand over cash for their new or second hand car purchase. Due to this fact they have to give thought to the choosing the best method for car credit and there are several options that could be considered.
The first option to consider is hire purchase, HP, this method is generally offered by the dealer in the showroom. You would be buying the vehicle over a certain period of time from the HP company and they would have ownership of the car until you had paid the last payment on the loan. This means that you would not be able to sell the vehicle or trade it in until the final payment had been made. You would also have to pay a deposit and the more deposit you paid the cheaper the monthly instalments to the company would be.
Another way of taking out car credit is take a personal loan. You could choose to take out a secured or unsecured loan and both have their advantages and disadvantages. If you are buying a brand new top of the range vehicle out of the showroom and it costs more than a small home then you may be better off looking into secured loans as they allow you to borrow more than an unsecured. You would generally be allowed to repay the loan over a long period of time which of course helps to keep down the cost of the monthly payments. However the downside to this type of finance is that the loan is secured against something of value which could be the vehicle or property. If you fell into difficulty repaying the loan then you could lose whatever was secured against the borrowing.
An unsecured loan might come with slightly higher rates of interest and you would not be able to borrow as much as with the secured. It would be based on your income and ability to repay the loan. However the plus side is that nothing is secured on the loan. You would also be able to sell the car should you want providing of course that you maintained the repayments or paid off the loan. Should you pay off the loan early then you could have to pay a one off fee so this should be checked in the small print of this type of car credit.
Posted by Edwin Miles on