Car loans have seen something of a boom in the last decade or so as more and more people look for alternative auto financing. When you look at car loans, it’s easy to see why people enjoy them so much. There are plenty of positives that make it a great financial option for some. Similarly, there are a fair few negatives that make it a poor option for others. Bearing that in mind, this article will look to bring the good and the bad together. It will look at the pros and cons of car loans, to help you figure out if it’s the right car financing option for you. Take a look at the points below for more info:
Makes expensive cars more affordable
The great benefit of car loans is that they open up your choices when buying a car. Vehicles that you once thought were too expensive are now a lot more affordable. A loan lets you space out the payments, which can help people afford more expensive cars that are better than what they’d have to settle for without a loan. You can use a loan to get a car you truly need, rather than settling for something below par.
Manageable payment plans
Car loans also provide you with manageable payment plans to help repay the loan. This means you get to choose how much you pay back each month to suit your personal budget. This is not something you get with other loan options out there, like quick loans. Quick loans may be quick, but that means they have to be repaid quickly, which doesn’t suit the borrower and often leads to penalty fees. With a car loan, the payment plan is easy to manage and helps you spread costs out over a long period.
Manageable interest rates
The final benefit of car loans is that they rarely offer ridiculously high-interest rates, particularly when compared to other borrowing options. Car loans can come with both fixed and variable rates, giving you greater flexibility when choosing your interest. It’s much better than some other finance options that charge astronomical rates to borrowers.
Can take time to be approved
One of the main cons of car loans is that they can take a while to be approved. When you apply for one, the lender has to go through background checks and look at your credit score. This has to be done as it allows them to make a decision as to whether or not they’ll grant you a loan. You see, car loans are often quite large as cars can be expensive. This differs from something like a cash advance, which is a smaller loan and requires less rigorous background checks. You’ll find that when an online cash advance is applied for, it’s usually approved on the same day. This isn’t the case for car loans, which can leave people frustrated as they need the money as soon as possible to pay for a new car.
Some loans require security
Another issue with car loans is that a lot of them are secured and use the car as collateral. This means that the lender has the right to seize your car if you don’t keep up with their repayment demands. As a consequence, this can be a huge problem if you undergo periods of financial uncertainty. Let’s say you have one month where you’ve got a lot of outgoings thanks to a series of unfortunate events. Now, you can’t pay your loan repayment for that month, and the lender may get annoyed and threaten to seize your car as collateral. A lot of people may feel uncomfortable having this threat hanging over them at all times, and would prefer not to have it.
Can take a long time to pay off
Finally, many people take issue with the fact that car loans take a long time to pay off. For some, they don’t like the thought of having to constantly pay back their loan over the course of a few years. It gives them one more financial burden to think about, and one more expense that eats away at their finances month after month.
In summary, there are loads of things that are good and bad about car loans. It all depends on your financial situation and how you like to pay for things. If you’re comfortable paying off a loan every month and prefer making purchases that spread over a few months/years, then it’s a great option for you. If you can afford to buy a car without a loan, then it’s not the best option, you should just buy the car and be free of any financial burden.
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