Buying a car is a considerable investment. Not many people can pay the amount for a new car in one go. For that reason, a car is often purchased on installment. Then you pay off part of your car each month, with the interest and costs in addition.
The type of loan
When you purchase a car you can choose from three different types of loans.
1. The revolving credit.
This has a variable interest rate, and a fixed percentage must be repaid per month. The duration of the repayment may vary, because it is possible to re-take repaid amounts once again. Because of this there is a chance that you will end up with a residual debt. Your car is due for replacement while the loan has not yet been paid. This loan form is therefore possible for a car, but you must have the discipline to pay off this loan as quickly as possible. In general, it is the cheapest form of borrowing money.
2. The payday loan.
The payday loan has a fixed interest rate and a fixed term. You know exactly where you stand. You also know when the car was paid off. Extra repayments are not possible and you cannot postpone the repayment, if it happens to be a bad idea. So you know where you stand, but the loan is not flexible.
3. Hire purchase.
This form of borrowing money resembles a payday loan. However, there is a downside to the lease-purchase scheme. If you cannot meet your financial obligation, they will collect the car again. As long as you have not repaid 75% of the lease, you are not the owner of the car.
4. Loan from the dealer himself
When you purchase an installment car, car dealers make good use of it. They say with the extras that you buy to make the car entirely to your liking not what it costs, but only mention the few euros that it costs extra per month. In this way they tempt the customer to purchase as many extras as possible. Therefore ask for exact amounts. That way you stand more firmly in your shoes and you are less likely to be tempted to purchase all kinds of unnecessary extras.
Borrowing money is often very simple and it is generally easy to think about. Make sure you never borrow more money than you can actually repay. Also always request multiple quotes when you want to borrow money to finance your new car. With this you can save yourself a lot of money.