Are you stuck and can’t decide whether you should finance your next car purchase? Needless to say if you can afford a straight full payment for a new or used vehicle then why not. However this is not true for most people and in fact more people choose to apply for a loan simply because they don’t have the cash or maybe they have other important financial obligations that also needs to be paid.
Moreover, people don’t know about the fact that there are a lot of options for them when it comes to car financing. Even consumers with poor credit or those with credit issues (i.e. bankruptcy) can still avail of an auto loan.
In order to help you decide, we are going to discuss the pros and cons of auto financing.
- Monthly Payments with Interest
Obviously in car financing, whether a new or used car, there will be monthly payments and interest payments. To add, cars are expensive therefore one should be prepared of such financial obligations. The main downside to auto financing is the monthly payment obligations that come with added interest.
Every situation is unique and depending on your financial state, the interest may be high or low. Lenders add interest because of the risk that they are taking with you as a borrower. Whether they see you as a high risk or moderate-risk debtor will largely depend on your credit rating.
- Go home with your Own Car
This is what car financing is all about – to provide you with a car that you need. Of course saving up money and then purchase a car would still yield the same result but the downside is saving up money could take years until you can afford to buy a car. Additionally, you might end up just settling with a car that you can afford but don’t really like. With car financing, it is more likely that you will achieve the car that you have yearned for.
- Build and Fix your Credit
If you have a poor credit or no credit at all, applying for a car loan is the best and easiest way to establish good credit. How? By making on-time monthly payments and successfully settling your loan, you can significantly improve your credit rating. By doing this, you will have a strong chance of securing another approval when you decide to buy another vehicle. To add, because of your good credit it is likely that you will not only get instant approval, you might also enjoy low interest rate offers on your next loan.
- Having the Car that You Want
With car financing, you don’t have to wait and save the amount of money required for your target car. More importantly, auto loans offer a lot of financing options for you to choose from. It is worth noting that if you decide to apply for a car loan, you have a wider array of vehicles to choose from and most of all, you get to go home with the car that you really love. To sum it up, the pros clearly outweigh the cons.