The best time to get a car loan is when you plan on buying a car. Easy as that, right?
While the answer may seem that simple for some, there are a lot of things to consider before opting to get a car loan in Hamilton. How do you know that’s the best viable option for you?
In our guide we breakdown the advantages of disadvantages of applying for a car loan and give you insights as to when you know you’re ready to apply to one.
First things first. How do you know that getting a car loan is the right way to go if you don’t know what all your option are? Let’s solve that mystery first before we dive any further.
Know Your Options
Before we start, it’s important to understand the various ways in which someone can purchase a car. The two most popular options are in cash or through financing. To better understand which method is best for you, we decode the pros and cons of each method below.
When you’re looking to buy a new vehicle, one option is to pay everything upfront. With a cash deal, you pay exactly what’s on the price tag without the fear of having to pay any interest on top of that like you would with a car loan. It’s one easy payment as opposed to multiple small ones over the course of months or years. The best part? Unlike financing, you’ll own your vehicle as soon as you pay for it without any worry that a loaner or third party can potentially repossess it.
While it all sounds pretty positive, there are downsides to paying in cash. For example, those who pay in cash typically go for used or older car models opposed to newer ones. Why? Because very few of us have $25,000 sitting around begging to be spent on a brand new car. Because used cars are only a fraction of the price of new ones, people who pay in cash often opt for that, sometimes having to compromise their dreams of having a specific new model.
Instead of taking that $8000 budget (for example) on an older or used car, if a buyer puts a portion of that towards a down payment for a car loan, they’ll have a wider selection of cars to choose from. Not to mention the fact that they won’t be losing a huge sum of money right away. Instead that money will be spread out over the course of a couple months, giving you the flexibility to use it for other things in the meantime.
Pros of paying in cash:
- You’ll own your vehicle immediately
- You never have to worry about the risk of repossession
- You’ll be losing a large chunk of your money immediately, instead of breaking it down into installments
- You may have to sacrifice going with an older model or used car based on your budget
Getting a car through financing is by far the most popular option for car buyers. Why? Because it gives them the flexibility to purchase a car they actually want opposed to sacrificing their desires for something that’s used. Unliking paying in cash as one large sum, you can pay back your loan in smaller installments over the course of an agreed upon timeframe with the lender. This gives you the flexibility to use that other money for other important things like investments and paying off other monthly debts.
Whether you have good credit already or you’re trying to rebuild it, getting a car loan in Hamilton is a great strategy to try and boost your credit history. This is especially true for those who have been struggling with credit for a long time. Lenders like Hamilton Bad Credit Car Loans can help anyone get a car loan, but specialize in cases where people are desperately trying to repair theirs. Their talented team works with you and takes your unique financial situation into account in order to find a car loan that works within your budget. That way, when it’s time to make monthly payments it’s easy and manageable. This payment consistency on your credit history will then help bump your score and inevitably help you with other financial endeavors in the future.
While financing may sound the most appealing of the two options, there are still some factors to consider that may deter you from taking this route. Firstly, you don’t have full ownership of the car until you fully pay back your loan. No problem, right? Well, it shouldn’t so long as you keep up with monthly payments. But sometimes, things get out of hand and for various personal reasons some people are unable to pay back their loan. If that happens, lenders are within their rights to repossess your vehicle, sell it and recoup the loss.
Pros of financing:
- Can help you build good credit
- Can help you afford a newer car model opposed to an old one
- Besides your initial down payment, the rest of your money stays in the bank until you start making monthly payment. This flexibility can help you use your money to pay off other debts or be used on investments
Cons of financing:
- You’ll have to pay back the full cost of the car plus interest back to the loaner
- You don’t fully own your car until you pay back your entire car loan
- If you fail to make monthly payments, your vehicle risks getting repossessed by the loaner who can take away your vehicle, sell it and recoup the loss
Choose The Option That’s Best For You
Now that you know the pros and cons of each option, it’s time to make a decision. But wait! Before you take the dive, here are some questions to ask yourself to help choose between the two:
- What type of car do I want? Is it new or used?
- How much money do I have saved?
- What is my credit score?
- Am I in a place to take on more debt?
- What interest rates can I qualify for?
Once you’ve been able to reflect on the answers above, you’ll be in a better place to know if you should pay for your next car in cash or through a car loan in Hamilton.
If you’ve determined that getting a car loan is the best route for you, it’s onto the next chapter. Let’s explain how they work and which type of loans are available out there for you.
How Do Car Loans Work?
Getting a car loan in Hamilton works similarly to getting other types of loans. The only thing that separate lenders apart are their application requirements, interest rates and terms and conditions.
When you submit an application and it gets approved, the lender will loan the borrower money in order to pay for their desired vehicle. Then through monthly installments, the borrower is expected pays back what they owe, plus interest. The two continue to maintain this lender-borrower relationship until the borrower pays back their entire loan.
There are two types of loans to consider when looking for financing — this includes secured and unsecured loans.
The key difference between the two is that secured loans have collateral, while unsecured do not. Like mentioned earlier, if you consistently fail to pay back your loan through a secured lender, they’re within their right to repossess your vehicle. This helps ensure that the lender will always be getting their money back. Because of this collateral, interest rates on secured loans are much lower.
On the other hand, since unsecured loans have no collateral to fall back on, their interest rates are much higher. Some borrowers may prefer as they don’t risk losing their car to a lender if they can’t keep up with payments. Instead unsecured lenders will typically send a collections agency to try and recoup the money that’s owed.
Of the two types of loans, secured are the most popular when it comes to car loans. If you do your research, know your budget and shop around for the best viable interest rates through a secured lender, paying them back shouldn’t be a problem. When you manage your money properly, repossession isn’t something you have to worry about.
When Are You Ready To Apply For A Car Loan?
You’re almost at the finish line! Now that you know you want to get a car loan in Hamilton, how do you know you’re ready to get one?
To make sure you’re in the best position to get a car loan, here are some things to consider:
You’ve Done Your Research
If you apply for a loan from the first lender you hear about or the first result that pops up on your Google search, you’re doing yourself a huge disservice. It’s not to say that option is bad, but how do you know if you got a good deal on your car loan if you don’t have anything to compare it to?
Remember, you want to find the lowest interest rates possible so you don’t end up paying almost double of what the car was actually worth. That would qualify as careless financial behaviour. Do you and your wallet a favour and take the time to shop around. Look into various banks, credit unions, dealerships and online lenders to compare their rates and find the one that suits you and what you’re looking for.
You Have Good Credit
There’s nothing that will get you to stand out from the crowd of applicants like having good credit. Not only will this increase your chances of getting your car loan approved, but lenders are more likely to offer you better interest rates than those with poor credit. If you think your credit history will prevent you from striking the car loan that you want, put your car-owning dreams to the side for the next little while and work on improving it. When your credit is where you want to be, start the hunt again.
You Can Afford It
Whether you get financing or not, a car isn’t a small purchase. It’ll end up costing you thousands of dollars once it’s all paid up, which can quickly add up if you have other debts you have to pay off like student loans, mortgages or other living expenses like rent, hydro and phone bills.
Always do the math first and put a budget together. Deep dive into your bank account and figure out how much money you have saved for a car. When getting a car loan, make sure you have enough money saved up for a down payment and a couple months worth of savings for your installments. Remember to always try and have that extra cushion of money saved for emergencies so you don’t risk getting your car repossessed by your lender.
You Have Bad Credit
Believe it or not, having bad credit shouldn’t deter you from applying for a car loan. In fact, it’s an effective way to help rebuild your credit if it hasn’t been its best lately. While you may have trouble getting approvals from major banks and credit unions, alternative lenders like Hamilton Bad Credit Car Loans can help you apply for a loan that works within your financial means. They secure loans for you no matter what your financial situation is. They’re on your side, so they fight on your behalf to score car loans in a short amount of time so you’ll be on your way to repairing your credit in no time.
Now that you know everything there is to know about car loans and when to get one, you’re in the position to start applying. If you follow the steps above and remember to do your research, you’ll be well on your way to driving the car you’ve always wanted.