Financial experts have advised prospective car buyers to get a car loan even if they have some idle money in the bank that can cover the cost of the new car. They believe that the idle cash can be put to other use, especially in the event of an emergency or for investments.
A car loan allows and gives a buyer the chance to purchase a car at the full price by making fixed monthly payments over an agreed period of time. The buyer is allowed to drive the new car after negotiating the initial down payment, interest rate and duration of the loan. Here are four hidden benefits of getting a car loan.
No Collateral Needed
A car loan is often easier to apply for than a standard bank loan. In getting a car loan, you don’t need collateral. This is not hard to figure out because the car serves as the collateral for the loan. Any default on the loan repayment will automatically lead to the lender taking possession of the car and not your other assets.
However, as you continue to pay the loan, each monthly payment is a step towards owning the car.
Good for Credit History
Having a poor credit history doesn’t necessarily impact on your ability to obtain a car loan. Instead, a conscientious effort on your part to meet the obligations of your car loan goes a long way to improving your credit history. Therefore, a car loan is a means to shoring up your credit history for regular loans in the future.
Some prospective car buyers settle for used cars rather than a car loan that allows them to acquire new cars. The thinking is that buying a used car is a way of saving money. However, in the long run, this measure turns out not to be the most cost-effective option.
Used cars are susceptive to faults and breakdown often, bringing along with the high costs of repairs. A car loan, however, guarantees you a new car, which comes with minimal mechanical and maintenance problems, unlike a used car.
The fact that many new cars tend to be more fuel-efficient is a plus to taking a car loan. It saves you a lot of money when it comes to refuelling your car.
Improves Personal Expenditure
In getting a car loan, you get the chance to decide how much you want to pay each month in the agreement. This means that you don’t have to worry about interest rates going high as your repayments are going to be fixed and unaffected. This leads to an organised expenditure on a monthly basis without unnecessary adjustments along the way.
There are some car loans that can even give you the opportunity to save for a new car while still paying for the current one, because of their seamless ease.
A car loan helps you to buy a better car than you probably could afford using your personal savings. It also spreads the payment over a long period of time in a way that is financially convenient for you. This is unlike a full payment for the same car that is capable of digging a gaping hole in your pocket.