Nowadays, almost every American family wants to own a car. However, acquiring one, whether new or used, can be costly. One of the first steps in purchasing a car is to consider the financing options available. To ensure that you find the right financing, investigate financing through a dealership loan, a bank or credit union loan, a loan from an online lender, or a home equity loan. .
Different options to finance your car purchase
Car dealership Loan
A dealership loan is a common and convenient option to finance a car. When you shop for a car, consider the auto financing that different dealers offer you. Offers vary, so take time to shop around for the best deal; compare the Annual Percentage Rate (APR) and length of the auto loan. Make use of loan calculators available on many websites. Dealers charge higher interest rates than banks or credit unions. The only advantage that you can get through the dealership loan is the convenience. Be aware that this type of loan can also be more costly because dealers make money from selling you your car in several ways like holding points of rate, undervaluing a trade-in, charging customer service fee and extended service contracts.
Home Equity Loan
A home equity loan means that you borrow a sum of money and your home serves as collateral. The interest you pay is tax deductible; that is, you can save more money on your taxes with this type of loan. The term of a home equity loan varies, usually ranging from 12 to 240 months. For example if you take $25,000 Home Equity Loan Up to 100% Equity loan with a 12 month term at 6.24% APR, your estimated monthly payment may be $2,154.42. The amount of your monthly payments may vary according to the length of term. Indeed, home equity loan is a great option to lower your interest cost and save money. Also, it comes with fixed interest rates that can benefit people trying to save for the future. The good thing about a fixed rate is you know exactly how much you’ll pay each month. However, you have to pay the monthly payment regularly because your home is at risk if you fail to do so.
Loan from banks or lending institutions
This option is ideal to those who want to have a car because it usually covers payment from five to seven years period. Meaning, you don’t have to rush when it comes to paying it because the allotted period is long enough. Here, the interest rate depends on the car model. Usually, banks run credit check once you apply. Your FICO score should be qualified in order for them to grant you loan. Now, here is an example that is based from BankingMyWay National Auto Rate tracker. An ordinary bank-generated 48 month (4 years) car loan presently carries an interest rate of 4.667%.Usually, banks offer ranges from 36months to 72 months for an auto loan. You can establish personal relationship with the bank; thus, you may benefit from it. However, there is a risk that you may experience the disadvantage of uncompetitive interest rate.
Now that you know the options for financing your car purchase, it’s time to think which option suits you; make a wise decision. Finding the right option isn’t a trivial matter.
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