Buying a car, both for a private person and for a company, can be quite a serious investment. Few buyers have cash that they could use for this purpose. Therefore, the only solution seems to be taking a loan for a car. What loan will be the best choice?
Special purpose loan
Financial institutions currently offer their clients a wide range of products tailored to our needs. Among them is also a car loan, which is a type of special purpose loan. This means that the funds that will be granted to us under such a loan must be allocated to the purpose strictly defined in the contract. In this case, by signing such a loan agreement with the bank, we commit to spend money to buy a car .
A car loan can usually be taken out on attractive terms. This is due to the fact that in this case the purchased car automatically becomes a security for the bank. The borrower is also required to take out AC insurance, and some financial institutions also require their own contribution. Of course, without major problems, we should find a bank that will not require us to invest our own money. However, we should remember that such a contribution may mean for us a lower interest rate on the loan and related commissions.
Some people think that the car loan is only for customers buying new cars. Nothing more wrong with such a loan you can easily finance the purchase of a used vehicle or even a car imported from abroad.
A cash loan
A special purpose loan is of course one of the possible solutions, although it is definitely the most popular option among borrowers. However, you can also buy a car by taking out a cash loan . Traditionally, you can apply for this type of loan at the bank and at non-bank companies. Banks can usually offer us slightly better conditions, but loan companies usually have lower requirements for borrowers. Therefore, it may be the only solution for people without a stable, documented income, or for those who do not have a very good history of previous debts.
The advantage of cash loans is that we don’t have to specify the purpose for which the money borrowed from a specific financial institution will be used. The funds are therefore sent to the client’s account, which does not have to account for how it was spent. Unfortunately, this type of debt is less financially advantageous for us than car loans. In this case, the lender does not receive any collateral in the form of a car. Therefore, it bears a much higher risk, which is offset by higher interest rate and commissions.
Compare different offers
Regardless of whether you decide on a special-purpose or cash loan, it is worth familiarizing yourself with the largest number of offers before making your final selection. Of course, browsing subsequent websites and documents related to specific proposals of financial institutions can be difficult. Therefore, it is worth using the opportunities offered to us by various internet tools. It is about comparison websites or car loan calculators.
Of course, the most important thing we should pay attention to when browsing offers from subsequent lenders is the total cost of such a loan. Interest and commissions are one thing, but you should also check very carefully whether taking out the loan does not involve any other obligations, such as additional fees or the need to purchase other financial products from such an institution . Let us also be sure about the manner of repayment of such a loan and the consequences that threaten us in the event of any problems with timely repayment of the debt.
Read the terms of the contract carefully
When we find an offer that seems to be favorable to us, we want to settle all formalities as soon as possible and receive money to buy a car. However, before we sign our contract with a bank or non-bank company, we should give ourselves enough time to thoroughly read its provisions. Even if, after talking to the person servicing us, we believe that the selected loan will be the perfect solution, let’s check the provisions of the contract on our own and explain any ambiguities with the specialist.
Regardless of whether we take out a loan for several months or years, we must be convinced that all the information contained in such a document is understandable to us. If we overlook even a small part in such an agreement, we can struggle with the consequences of signing it for many years. We should remember that any debt not paid on time means placing our data in the BIK database . And this may ruin our chances of getting a loan again in the future.